Sharechat Logo

NZ dollar weakens as signs of improvement in US economy signals pull back in stimulus

Friday 2nd August 2013

Text too small?

The New Zealand dollar weakened as signs of improvement in the US economy point to the Federal Reserve reducing its monetary stimulus, bolstering the greenback.

The kiwi slipped to 78.74 US cents at 8am in Wellington, from 79.65 at 5pm yesterday. The trade-weighted index fell to 75 from 75.54.

The US dollar index, which measures the greenback against a basket of currencies, rose to its highest in more than a week after US reports showed manufacturing expanded in July at the fastest pace in more than two years and first-time claims for unemployment insurance fell to the lowest in five years. Traders will be looking to a US jobs report tonight for further signs of strength which may prompt the Fed to start tapering its US$85 billion a month bond-buying programme which has debased the greenback.

"The NZD/USD has felt the pinch of broad strengthening in the USD overnight," Mike Jones, a currency strategist at the Bank of New Zealand, said in a note. "The greenback has been the star performer as a string of strong US data restored faith in Fed tapering."

A report to be published in Washington today is expected to show the US unemployment rate ticked down in July, to 7.5 percent from 7.6 percent in June, whilst the country added 185,000 non-farm jobs, according to Reuters polls.

"The risks here appear tilted towards a strong result," said BNZ's Jones. "If this proves to be the case, the headwinds from additional USD strength would likely press the NZD/USD back down into the 76.90-78.90 cent range."

Overnight, the European Central Bank kept its benchmark interest rate unchanged and reiterated interest rates will stay low for the foreseeable future. The Bank of England also kept its benchmark rate at a record low and left its bond-buying programme on hold.

The local currency fell to 59.60 euro cents at 8am in Wellington, from 59.98 yesterday and slipped to 52.08 British pence from 52.52 pence. The kiwi was little changed at 78.32 yen and weakened to 88.24 Australian cents from 88.85 yesterday.

BusinessDesk.co.nz

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar headed for 1.3% weekly gain on expectations of a Fed rate cut
RBNZ knock-back gives Resolution chance to low-ball AMP - Jarden
Rail hubs may not boost Napier Port log trade
O'Connor looks to overhaul Biosecurity Act, improve animal tracing
Denton Morrell undefended at liquidation hearing
Contact steam to heat Norske Skog pellet business secured
Air NZ to amend booking engine after lawyer’s complaint
Ross McEwan to take helm at NAB
KPMG says bank capital proposals will wreck havoc on dairy farmers
Mild weather saps Vector's June-qtr volumes

IRG See IRG research reports