NZ dollar falls as rising US durable goods orders, consumer sentiment stoke greenback

Thursday 24th November 2016

The New Zealand dollar fell as measures of US durable goods orders and consumer sentiment rose, pointing to a pickup in the US economy and higher US interest rates.

The kiwi dollar fell to 70.05 US cents as at 8:30am in Wellington, having earlier dropped as low as 69.89 cents, from 70.62 cents late yesterday. The trade-weighted index fell to 77.33 from 77.68.

The US dollar advanced to the highest level in more than a decade after a US Commerce Department report showed that orders for US durable goods rose a better-than-expected 4.8 percent in October while the University of Michigan's consumer sentiment index gained to a final reading of 93.8 in November, the highest level since May. Meanwhile minutes of the last Federal Reserve policy meeting showed the American central bank saw enough economic growth to warrant rate hikes soon. The US dollar index rose to a 16-year high, the yield on 10-year Treasuries touched a 16-month high and the Dow Jones Industrial Average reached a record high.

"US interest rates and the US dollar made fresh multi-year highs following some strong economic data," said Imre Speizer, senior market strategist at Westpac Banking Corp. The Fed minutes "merely confirm the 25 basis point hike in December which the market has fully priced in".

US financial markets are closed on Thursday for the Thanksgiving holiday. Speizer said the kiwi is "vulnerable to falling below 69.90" US cents given the greenback's strength.

The kiwi dropped to 94.78 Australian cents from 95.16 cents late yesterday. It declined to 4.8457 yuan from 4.8655 yuan and rose to 78.87 yen from 78.46 yen. It dropped to 56.29 British pence from 56.87 pence and slipped to 66.39 euro cents from 66.48 cents.

The two-year swap rate rose 3 basis points to 2.24 percent, while the 10-year swap rate rose 4 basis points to 3.26 percent.

BusinessDesk.co.nz

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