NZ dollar gains as US growth concerns keep greenback under pressure

Wednesday 3rd August 2016

The New Zealand dollar gained as concerns about the strength of the US economy weighed on the greenback, eroding optimism a rate cut by the Reserve Bank will do much to drag down the kiwi.

The local currency rose to 72.31 US cents from 71.86 cents yesterday. The trade-weighted index advanced to 76.61 from 76.46.

The dollar index, a measure of the greenback against a basket of currencies, extended its decline, falling to the lowest level in more than a month as investors weighed up the impact of last week's lackluster second-quarter gross domestic product data in the US. That stifled any decline in the Australian dollar when the Reserve Bank of Australia cut its target cash rate a quarter point to 1.5 percent yesterday, raising questions as to whether a similar move by New Zealand's central bank will gain any traction in pushing the kiwi lower.

"The US dollar sold off across the board as the disappointing Q2 GDP data continued to damage confidence in the US’ ability to grow strongly," ANZ Bank New Zealand agri economist Con Williams said in a note. "As an RBA cut yesterday highlighted it’s going to be a tough ask for the RBNZ to get the NZ dollar lower by just cutting rates too."

A 9.9 percent increase in prices for whole milk powder at Fonterra Cooperative Group's GlobalDairyTrade auction overnight buoyed demand for the kiwi dollar.

The local currency fell to 95.08 Australian cents from 95.52 cents yesterday, retracing most of yesterday's bounce after the RBA cut its benchmark rate.

The kiwi slid to 72.98 yen from 73.58 yen yesterday with Japan's currency the biggest beneficiary of the US dollar weakness. The local currency edged up to 64.42 euro cents from 64.25 cents yesterday, and slipped to 54.17 British pence from 54.44 pence. It gained to 4.7911 Chinese yuan from 4.7893 yuan yesterday.

BusinessDesk.co.nz

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