NZ dollar declines as US data signals continued economic expansion

The New Zealand dollar has fallen 15% against the greenback so far this year, reflecting weaker economic growth, falling dairy prices, lower interest rates and a pick up in the US. Photo / NZME.

The New Zealand dollar declined after US economic data kept alive expectations the Federal Reserve may hike interest rates this month.

The kiwi slipped to 63.42 US cents at 8am in Wellington, from 63.63 cents at 5pm yesterday. The trade-weighted index dropped to 68.86 from 69.04 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, advanced on signs the US economy is continuing to expand. The ADP employment data showed US private payrolls increased 190,000 last month.

While short of expectations for about 200,000, it's a step up from the 177,000 positions created in July.

Meanwhile, the Fed's Beige Book snapshot of economic conditions across its 12 districts showed economic activity continued expanding across most regions and sectors during the reporting period from July to mid-August.

"US sentiment and equities were boosted by Fed Beige Book comments that the US economy continued to expand," ANZ Bank New Zealand senior economist Sharon Zollner and economist Dylan Eades said in a note.

"Punters remain divided on whether the Federal Reserve will commence interest rate normalisation this month, or hold off until the global situation becomes clearer."

ANZ expects the kiwi to trade in a narrow range of 63 US cents to 63.90 cents today ahead of the closely watched US non-farm payrolls data tomorrow.

Chinese equity markets, which have been volatile, are closed for the remainder of the week as part of public commemorations for the 70th anniversary of the end of World War Two, which may help dampen market volatility, ANZ said.

In New Zealand today, Auckland real estate firm Barfoot & Thompson is scheduled to release its latest housing market data, and Statistics New Zealand publishes data on second-quarter building work.

The New Zealand dollar fell to 90.07 Australian cents from 90.47 cents yesterday.

Traders will be eyeing Australian retail sales and trade data today after a weak second-quarter gross domestic product report yesterday.

The kiwi advanced to 56.50 euro cents from 56.40 cents yesterday ahead of the European Central Bank interest rate decision today.

The local currency slipped to 41.44 British pence from 41.56 pence, weakened to 76.28 yen from 76.48 yen, and declined to 4.0300 yuan from 4.0490 yuan.