NZ dollar pops above 70 US cents as greenback weakens

NZ dollar pops above 70 US cents as greenback weakens on manufacturing data

By Tina Morrison

May 3 (BusinessDesk) - The New Zealand dollar rose above 70 US cents overnight as the US dollar weakened after a report showed US manufacturing activity slipped in April, raising concern about the pace of recovery in the world's largest economy.

The kiwi gained to 70.09 US cents at 8am in Wellington, from 69.93 cents at 5pm yesterday. The trade-weighted index was unchanged at 73.53. Many markets, including London, were closed yesterday for the May Day public holiday.

The US dollar index, which measures the greenback against a basket of currencies, slumped to its lowest level since January 2015 after a report showed US factory activity expanded at a more moderate pace in April as new orders and production slowed amid a continued drawdown in inventories. The Institute for Supply Management index of national factory activity slipped to 50.8 last month from 51.8 in March and below economist expectations of 51.4. A reading above 50 separates expansion from contraction in the manufacturing sector, which accounts for 12 percent of the US economy.

"The US dollar remained on the back foot as the ISM declined," ANZ Bank New Zealand agri economist Con Williams and senior foreign exchange strategist Sam Tuck said in a note. "Markets noted that US manufacturing remains just above stall speed."

The local focus today is the Reserve Bank of Australia's interest rate decision at 4:30pm New Zealand time. Traders have increased their bets for a 25 basis point cut to about a 50/50 chance following weaker than expected first-quarter inflation data last week.

ANZ expects the RBA to remain on hold and says the kiwi/Aussie cross rate is likely to be volatile either way.

The kiwi slipped to 91.45 Australian cents from 92 cents, after hitting a two-month high of 92.19 cents yesterday.

The local currency advanced to 74.61 yen from 74.54 yen yesterday, ahead of a three-day 'Golden Week' holiday in Japan starting today.

The New Zealand dollar slipped to 47.78 British pence from 47.87 pence yesterday and fell to 60.84 euro cents from 60.97 cents.

It gained to 4.5381 yuan from 4.5271 yuan ahead of the release of April Chinese manufacturing data this afternoon.

(BusinessDesk)

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