NZ dollar weakens as greenback buoyed by economic optimism
By Tina Morrison
May. 26 (BusinessDesk) - The New Zealand dollar fell as positive US economic data strengthened the greenback and some investors reduced their holdings of the local currency on concern about falling commodity prices.
The kiwi slipped to 85.36 US cents at 8am in Wellington, from 85.39 cents at the New York close and 85.61 cents at 5pm in Wellington on Friday. The trade-weighted index dropped to 79.75 from 79.92 on Friday.
The US dollar index, which measures the greenback against a basket of currencies, strengthened after a report showed new home sales in April rose more than expected and the month earlier figures were revised higher, buoying optimism about a revival in the world's largest economy following weaker data in the first quarter due to harsh winter weather. Conversely, some investors pulled back their expectations for a higher kiwi on concern the elevated level of the local currency doesn't reflect a decline in dairy commodity prices.
"We are overdue for some continued US dollar strength. The US data generally has been quite good to counteract the weak data in the first quarter and we should have some exceptionally strong data going forward," said Martin Rudings, senior adviser at OMF. "While we have been attractive to investors offshore because of the high yield, I think the uncertainty about commodity prices is starting to filter through. A lot of offshore people are very long New Zealand dollars and I think as soon as there is some doubt, they start to scramble out. Dairy prices have probably got a little bit further downside in them."
The kiwi may trade in a tight range of 85.10 US cents to 85.70 cents today, Rudings said. US financial markets are closed for the Memorial Day holiday today while the UK has a bank holiday.
In New Zealand today, traders will be eyeing data on the latest trade balance, scheduled for release at 10:45am.
The New Zealand dollar slipped to 92.40 Australian cents at 8am from 92.63 cents at 5pm on Friday, weakened to 62.64 euro cents from 62.73 cents, edged lower to 50.69 British pence from 50.75 pence and slipped to 87.08 yen from 87.13 yen.