NZ dollar may gain after weaker US economic data saps demand for greenback
By Tina Morrison
Aug 19 (BusinessDesk) – The New Zealand dollar may gain after weaker than expected US data eroded investors’ confidence in the recovery of the world’s biggest economy, and dimmed demand for the greenback.
The kiwi was little changed from the New York close at 80.98 US cents at 8am in Wellington, and up from 80.65 cents at 5pm in Wellington Friday. The trade-weighted index rose to 76.09 from 75.79 in Wellington on Friday.
The US dollar weakened and commodities such as gold, copper and iron ore strengthened late last week after economic reports on building permits and consumer sentiment were softer than expected. Still, most traders expect a revival in the US economy to prompt the Federal Reserve to decide at its next meeting on September 17-18 to start tapering its US$85 billion a month monetary stimulus programme.
“It does look the kiwi is going to edge a little higher against the US dollar - it’s more to do with US dollar weakness,” said Stuart Ive, senior client advisor FX and derivatives at OM Financial. The weaker reports “were just enough to keep the US dollar under wraps and push us higher, even though the market still widely expects the US to start tapering in September.”
“The data we have seen at the end of last
week, whilst not stellar, it is still positive and it is
showing signs of continuous growth, so the markets are still
expecting the stimulus withdrawal to start in September, but
that said and done, the US dollar is seen as a little bit
weaker on the back of that,”
Friday’s earthquakes which shook Wellington and the upper South Island hadn’t affected the kiwi today, Ive said.
The New Zealand dollar has support at 80.80 US cents and faces resistance at 81.40 cents today, Ive said.
Traders will be eyeing the second quarter Producer Price Index report at 10:45am today for signs of inflation. Ahead of that, the BusinessNZ-PSI for July is scheduled for release at 10:30am.
The local currency edged up to 88.17 Australian cents at 8am in Wellington from 88 cents at 5pm on Friday and gained to 78.98 yen from 78.80 yen. The kiwi increased to 60.73 euro cents from 60.44 cents and rose to 51.80 British pence from 51.60 pence.