NZ dollar heads for 1.3% weekly fall as greenback firms, US jobs data looms

Friday 5th September 2014

The New Zealand dollar is heading for a 1.3 percent weekly decline against the greenback as a string of US economic data firms up support for the world's reserve currency on expectations the Federal Reserve will start hiking interest rates early, and as US employment figures loom.

The kiwi fell to 82.84 US cents at 5pm in Wellington from 83.97 cents on Friday in New York last week, and was down from 83.11 cents at 8am and 83.20 cents yesterday. The trade-weighted index was little changed at 78.77 from 78.67 yesterday, and is heading for a 0.4 percent weekly fall from 79.07 last week.

A BusinessDesk survey of 11 currency traders and strategists on Monday predicted the kiwi would trade between 82.20 US cents and 84.50 cents this week. Nine expected the currency to decline, and two said it would probably remain broadly unchanged.

The US Dollar Index, a measure of the greenback against a basket of currencies, rose to its highest since July last year as recent economic data points to a stronger recovery, heightening expectations the Fed will start raising interest rates earlier and faster than previously thought. Meantime, the kiwi came under pressure as falling dairy prices raised questions about the strength of the local economy. Traders are waiting for US non-farm payrolls data on Friday in Washington for another gauge on the world's biggest economy, with analysts forecasting another 225,000 jobs were added in the month.

"If we get a good number, that will affirm the US recovery and strength in the US dollar," said Michael Johnston, senior dealer at HiFX in Auckland. "The kiwi's going to remain a bit volatile, with the bias still to the downside."

HiFX's Johnston said he wouldn't be surprised if the kiwi heads toward 80 US cents towards the end of the year.

The local currency touched a six-week high against the euro after the European Central Bank unexpectedly cut the refinancing rate and deposit rate by 10 basis points to 0.05 percent and minus 0.2 percent respectively, and president Mario Draghi also announced plans to start buying at least 700 million euros of asset-backed securities to invigorate a lacklustre European economy and stir inflation in the euro-zone. The kiwi traded at 64.05 euro cents at 5pm in Wellington from 63.27 cents yesterday.

The local currency was almost unchanged at 87.22 yen from 87.21 yen yesterday, and fell to 88.66 Australian cents from 89.01 cents. It rose to 50.78 British pence from 50.55 pence, after the Bank of England yesterday kept monetary policy unchanged.

BusinessDesk.co.nz

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