NZ dollar slips below 87 US cents as US dollar rebounds
By Tina Morrison
June 23 (BusinessDesk) - The New Zealand dollar slipped from its recent highs above 87 US cents as the US dollar
rebounded during the weekend.
The kiwi softened to 86.93 US cents at 8am in Wellington, from 86.96 cents at the New York close and 87.20 cents in
Wellington on Friday. The trade-weighted index edged lower to 81 from 81.04 on Friday.
The US dollar regained some ground following its slide after the Federal Reserve last week cut its forecast for US
economic growth and lowered its projections for long-term interest rates, pushing New Zealand's trade-weighted currency
index to a new record. Still, the kiwi is likely to remain supported as investors are drawn to the yield advantage
offered by the nation's higher interest rates, analysts said.
The kiwi weakened "in response to the stronger US dollar over the weekend," said Peter Cavanaugh, client advisor at
Bancorp Treasury Services. "It's a bit of a correction from the US dollar weakness after the Fed meeting. It's difficult
to see it falling away."
Today, traders will be eyeing May migration data which is expected to continue to show fewer New Zealanders leaving and
more returning from overseas, helping drive economic growth. The report will be released at 10:45am, while data on May
credit card spending is published at 3pm.
Strong migration data was a key reason cited by the Reserve Bank this month for sticking to its plan to keep hiking
interest rates. The bank has increased the benchmark rate three times so far this year.
Traders will also be keeping an eye on tensions in Iraq, where a flare up could cause a "flight to safety" in currency
markets, Bancorp's Cavanaugh said. Safe haven buying usually supports stable currencies such as the yen and the Swiss
franc as investors exit higher yielding currencies such as the kiwi.
China's flash HSBC PMI manufacturing data for May will be watched this afternoon for signs of how Asia's largest economy
is tracking. The reading is expected to show a slight improvement to 49.7 from 49.4 last month. Eurozone and US PMIs are
released tonight.
The New Zealand dollar was little changed at 51.07 British pence from 51.13 pence on Friday, at 63.97 euro cents from
63.98 cents, unchanged at 92.63 Australian cents and edged lower to 88.74 yen from 88.81 yen.
(BusinessDesk)