By Paul McBeth
Dec. 18 (BusinessDesk) - The New Zealand dollar was little changed in local trading as traders await US talks to avert the US$600 billion fiscal cliff and after New Zealand's Treasury pared back its growth forecasts.
The kiwi traded at 84.42 US cents at 5pm in Wellington from 84.36 cents at 8.30am and 84.39 cents yesterday. The trade-weighted index was 75.26 from 75.27 yesterday.
Markets are flat-footed as they wait for US legislators to cut a deal and avert the so-called fiscal cliff from coming into effect on Jan. 1. The House of Representatives will meet on Boxing Day with Speaker John Boehner expected to put a deal to Congress as his negotiations with President Barack Obama drag on.
"Most of the market is expecting a positive outcome to be good for the kiwi on the basis it's good for risk sentiment," said Dan Bell, currency strategist at HiFX in Auckland. "It will be interest if the announcement is made on those days between Christmas and New Year when markets are pretty thin - we could be in for a fairly volatile finish to the year."
Markets were largely unmoved by the minutes for this month's Reserve Bank of Australia board meeting, which gave few hints as to whether the central bank will cut rates again when it next meets in February. The kiwi was little changed at 80.01 Australian cents at 5pm in Wellington from 79.99 cents yesterday.
"I've got the feeling the RBA will continue to have more of an easing bias - its economy is heavily leveraged to mining and resources and they want to give the rest of the economy a bit of a break," Bell said.
New Zealand's Treasury also trimmed its forecast economic growth over the coming years as the strength of the currency and weak state of global markets weighs on the local economy. The government department sees growth peaking at 2.9 percent in 2013/14, before slowing to 2.4 percent by the 2017 fiscal year.
Tomorrow's balance of payments is expected to show New Zealand's current account deficit narrowed to 4.8 percent of gross domestic product in the third quarter, and GDP figures on Thursday will likely show the economy grew 0.4 percent in the same period.
The kiwi was little changed at 70.93 yen from 70.89 yen yesterday. The local currency decreased to 64.06 euro cents from 64.13 cents and fell to 52.04 British pence from 52.21 pence.