NZ dollar gains as greenback weighed on by weak data

New Zealand dollar gains as greenback weighed on by weak data, rate cut talk

By Rebecca Howard

June 4 (BusinessDesk) - The New Zealand dollar gained after weak US manufacturing data and talk of a possible US rate cut weighed on the greenback.

The kiwi was trading at 65.98 US cents at 7:45am versus 65.34 late yesterday in New York after a holiday weekend in New Zealand. It was at 65.10 US cents late Friday in Wellington. The trade-weighted index was at 72.40 from 72.21 late yesterday in New York.

The US dollar took a tumble after the Institute for Supply Management said its US manufacturing purchasing managers index declined to 52.1 from 52.8 in April, marking the lowest level since October 2016. Also, James Bullard, head of the St Louis Federal Reserve said lower interest rates may be “warranted soon" given rising trade tensions and weak US inflation.

"Weaker than expected US ISM data, coupled with Fed's Bullard suggesting a cut to US rates may be on the cards, saw markets sell the USD and ratchet up the odds of a cut in the US," said ANZ FX/rates strategist Sandeep Parekh.

Domestically, he said there will be some interest in the terms of trade data due today but the main focus will be on the Reserve Bank of Australia's rate decision. The kiwi was trading at 94.54 Australian cents versus 94.08 late yesterday and "markets are going into today's RBA meeting expecting a cut in rates and dovish forward guidance," said Parekh.

Prashant Newnaha, senior Asia-Pacific rates strategist for TD Securities, said a rate cut in Australia is fully priced in and "if the bank does not cut, the market would seriously question the RBA's communication strategy."

The New Zealand dollar was at 52.06 British pence at 7.45am from 51.68 pence yesterday, at 58.64 euro cents from 58.43, at 71.24 yen from 70.81 and at 4.5538 Chinese yuan from 4.5047.

(BusinessDesk)

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