The New Zealand dollar bounced as exuberance for a strengthening US dollar waned after its rapid gain over the past three months, and ahead of this morning's New Zealand Economic Institute of Research's quarterly survey of business opinion.
The kiwi rose to 78.21 US cents at 8am in Wellington from 77.67 cents yesterday. The trade-weighted index increased to 76.37 from 76.21 yesterday.
Traders pared back their support for the greenback after its steady gain since the end of June, with the US dollar index, a measure of the greenback against a basket of currencies, up as much as 8.7 percent. The US currency has been a favourite in recent months as an improving US economy has stoked the prospect of higher US interest rates, increasing the attraction of the US currency.
"It's come such a long way, there's probably a bit of profit taking, which is causing the US dollar to come off and as a consequence, we'd need another batch of US data to get to the next leg higher," said Mark Johnson, the senior foreign exchange dealer at OMF in Wellington. "The kiwi is probably going to have a pretty shallow bounce - it could push up to 79 (US cents), but I would imagine if that were the case there'd be good selling back up there."
Traders will be watching the NZIER's business survey, scheduled for a 10am release, for another gauge of the local economy. Business confidence is expected to remain solid, while coming off highs earlier in the year. The Westpac McDermott Miller employment confidence index for the September quarter, released yesterday, showed the strongest sentiment in six years, despite falling agricultural commodity prices knocking export prospects.
