NZ dollar holds near 6-month lows, may fall further as greenback revives

Tuesday 26th August 2014

The New Zealand dollar held near six-month lows on expectations the greenback will extend gains given the prospect of US interest rate hikes next year.

The kiwi traded at 83.40 US cents at 5pm from 83.45 cents late yesterday. It dropped as low as 83.08 cents after government figures showed the trade deficit in July was a wider-than-expected $692 million. The trade-weighted index was at 78.74 from 78.78 yesterday.

The US dollar index, which measures the greenback against a basket of major currencies, has risen to its highest levels in 11 months as traders and investors speculate when the Federal Reserve will begin raising its benchmark interest rate from near zero. By contrast, the Reserve Bank of New Zealand is seen pausing its tightening cycle through the end of 2014 and traders are also pondering the uncertainty of next month's election.

"The Fed is going to raise rates - it's just a matter of when," said Michael Johnston, senior trader at HiFX. "We still think sell the kiwi on the rallies. We've seen the highs. New Zealand data has been a bit more mixed of late and we've got an election coming up."

The New Zealand dollar rose to 89.73 Australian cents from 89.55 cents yesterday and traded at 63.17 euro cents from 63.18 cents. It was at 50.26 British pence from 50.37 pence and fell to 86.62 yen from 86.97 yen yesterday.

BusinessDesk.co.nz

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