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NZD/USD fell due to a drop in Asian equities

nzd2New Zealand’s dollar retreated against its US counterpart on Tuesday, heading for the biggest drop this month, after hitting the highest level in four months last week, because the drop in Asian shares triggered risk aversion.

NZD/USD fell to a session low at 0.8303 at 8:01 GMT, the pairs lowest point since September 18th. Support was likely to be received at September 18th low, 0.8206, while resistance was to be met at September 20th high, 0.8401.

The MSCI Asia Pacific Index of stocks fell 0.7%, after the 0.5% retreat of the Standard and Poor’s 500 Index on Monday.

Additionally, the kiwi dollar fell from the highest level in almost five years against the Australian dollar, as traders adjusted bets for central bank interest rates. Traders saw an 80% probability that the Reserve Bank of New Zealand (RBNZ) will lift borrowing costs from the current record low level of 2.50% by April next year, as the odds for such an action were 96% on Monday, according to Bloomberg. On the other hand, there was a 49% chance that the Reserve Bank of Australia (RBA) will cut its benchmark interest rate additionally from an already record low of 2.50% by April 2014.

Meanwhile, market players remained wary, after New York Federal Reserve President William Dudley expressed his approval of the central bank’s decision to leave its stimulus program without change last week. He said that US economy “still needs the support of a very accommodative monetary policy.” Also on Monday, the Fed President for Atlanta, Dennis Lockhart, stated that monetary policy should stress on creating a more dynamic economy after a recent cooling in economic growth.

Elsewhere, the kiwi was lower against the Aussie, as AUD/NZD cross advanced 0.52% on a daily basis to trade at 1.1326 at 8:22 GMT.

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