NZ dollar rises against weaker greenback; touches fresh record vs. euro

Thursday 16th April 2015

The New Zealand dollar rose to a 10 day high as a weaker greenback overshadowed the negative impact of falling dairy prices and softer Chinese data. The kiwi touched a record high against the euro after European Central Bank president Mario Draghi scotched speculation stronger data might curtail the bank's money printing programme.

The kiwi touched 76.15 US cents and was trading at 75.89 cents at 8am in Wellington, from 75.20 cents at 5pm yesterday. It reached a record 71.25 euro cents and was trading at 71.02 cents at 8am from 70.75 cents yesterday.

The US dollar index, which measures the greenback against a basket of currencies, dropped after March industrial production and the April Empire manufacturing survey printed weaker than expected. That comes after US retail sales missed expectations, adding to speculation that the Federal Reserve may not raise interest rates as early as June.

"The weaker than expected US data flow kept the US dollar on the back foot," ANZ Bank New Zealand senior economist Sharon Zollner and senior FX strategist Sam Tuck said in a note. "A June start to interest rate normalisation is looking ever more unlikely, implying a yield driven meaningful correction south in the NZD/USD could be some time away too."

ANZ expects the kiwi to trade between 73.50 US cents and 76.80 cents today.

US industrial production declined 0.6 percent in March, more than an expected drop of 0.3 percent. Manufacturing activity in New York State unexpectedly contracted in April, with the general business conditions index falling to -1.19 in April, compared with expectations in a Reuters poll for a rise to 7.0.

Meanwhile, in the GlobalDairyTrade auction overnight, the average winning price declined 3.6 percent as volumes increased. While smaller than the 10.8 percent decline in the previous fortnightly auction, the weakness was centred on New Zealand’s main export products, whole and skim milk powder, which fell 4.3 percent and 7.8 percent respectively, ANZ said, raising concern about Fonterra Cooperative Group's payout for next season.

In New Zealand today, traders will be eyeing the release of the BNZ BusinessNZ performance of manufacturing index.

The New Zealand dollar slipped to 98.84 Australian cents from 99.03 cents yesterday ahead of Australian employment data today.

The local currency gained to 51.09 British pence from 50.96 pence and advanced to 90.38 yen from 89.95 yen. The trade-weighted index advanced to 79.57 from 79.18 yesterday.

BusinessDesk.co.nz

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