NZ dollar advances as greenback declines from four-year high

File photo / NZ Herald

The New Zealand dollar advanced as the greenback fell from its highest level in more than four years following weaker US trade data and declining oil prices.

The kiwi rose to 77.75 US cents at 8am in Wellington, from 77.44 cents at 5pm yesterday. The trade-weighted index gained to 76.58 from 76.29 yesterday.

The dollar index, which measures the greenback against a basket of currencies, declined after touching 87.406, its highest level since June 2010. The US trade deficit widened in September as exports cooled from a record. Currencies of oil exporting nations such as Norway, Canada and Russia declined after crude prices fell to their lowest in three years.

The New Zealand dollar gained after failing to hold below 77 US cents yesterday, underpinned by the nation's higher interest rates compared to rates in other major economies.

"It doesn't want to get below 77, there seems to be some profit taking and some yield buying," said Peter Cavanaugh, client advisor at Bancorp Treasury Services. "The kiwi has held up remarkably well. The New Zealand dollar's performance to make even these small gains is a positive."

The New Zealand dollar briefly dipped early this morning following Fonterra Cooperative Group's latest GlobalDairyTrade auction, then recovered. The GDT price index slipped 0.3 percent on lower volumes.

"Prices should stabilise around these levels, before recovering moderately in the second half of 2015," Raiko Shareef, currency strategist at Bank of New Zealand, said in a note.

BNZ expects Fonterra will have to lower its forecast payout to farmers for the 2014/15 season to $4.90 per kilogram of milksolids from the dairy manufacturer's current $5.30/kgMS estimate. Dairy products are New Zealand's largest export.

In New Zealand today, traders will be eyeing September quarter employment data scheduled for release at 10:45am. The unemployment rate is expected to fall to 5.4 percent from 5.6 percent, according to a Reuters poll of economists.

Elsewhere, Australia, China, the Eurozone and the US all have services PMI reports.
The local currency advanced to 88.98 Australian cents from 88.71 cents yesterday, edged up to 61.94 euro cents from 61.81 cents and rose to 48.59 British pence from 48.40 pence.

The kiwi touched a six-week high of 88.35 yen, and was trading at 88.26 yen at 8am from 87.93 yen yesterday. This afternoon, attention will be on a speech by Bank of Japan governor Haruhiko Kuroda at the Kisaragi-kai meeting in Tokyo, after he unexpectedly announced further monetary stimulus measures on Friday.