NZ dollar declines as traders bet on rebound in US jobs data

File photo / NZ Herald

The New Zealand dollar declined as investors favoured the US dollar on the expectation better jobs data this week will show the US economy is improving.

The kiwi fell to 75.30 US cents at 8am in Wellington, from 75.34 cents at the New York close and 75.85 cents at 5pm in Wellington on Friday.

The trade-weighted index slipped to 78.02 from 78.34 on Friday.

The US dollar index, which measures the greenback against a basket of currencies, rose over the weekend on optimism the US economy may be stabilising after a string of weaker economic data.

Reports showed US manufacturing activity held near a two-year low in April, but consumer confidence jumped.

Investors are anticipating the April US non-farm payrolls data this Friday may show the world's largest economy started to pick up in the second quarter, following a slowdown in the first quarter.

"Given last month's surprisingly anemic job growth and the big improvement in jobless claims, everyone expects a significant rebound in payroll growth," Kathy Lien, managing director of FX strategy for BK Asset Management said in a note.

"The unemployment rate is also expected to drop to 5.4 per cent, which would represent a big improvement that should breathe new life into the US dollar."

Also helping support the US dollar, two Federal Reserve officials indicated that a June rate hike remains on the table, Bank of New Zealand currency strategist Raiko Shareef said in a note.

The string of weaker US data had prompted many traders to push out their expectation for rate hikes until September.

San Francisco Fed President John Williams told reporters after delivering a speech on Friday that to support a rate rise in the early summer would require the data between now and then to be good.

He said that while economic activity over the start of the year was disappointing, he had not yet changed his forecast for the year and will be looking to data coming in before June or the meeting right after that.

Consistent with Williams' comments, Cleveland Fed President Loretta Mester said Friday that the Fed is getting close to the appropriate time to raise interest rates and all scheduled meetings, including June, are "on the table".

She explicitly highlighted the importance of the next two employment reports.

In New Zealand today, the ANZ Commodity Index is scheduled for release at 1pm.

Traders will also be eyeing the HSBC report on Chinese manufacturing activity for a gauge on how New Zealand's largest trading partner is tracking.

The New Zealand dollar slipped to 96.06 Australian cents from 96.11 cents on Friday, ahead of the Reserve Bank of Australia decision on interest rates tomorrow.

Traders are pricing in a 73 per cent chance of a rate cut, according to the Overnight Index Swap Curve.

The local currency gained to 49.69 British pence from 49.41 pence on Friday following weaker UK manufacturing data and ahead of the UK general election this Thursday.

The kiwi weakened to 67.32 euro cents from 67.66 cents on Friday and dropped to 90.51 yen from 90.74 yen.