The New Zealand dollar is heading for a 1.2 percent weekly decline after falling dairy prices stoked concerns about the strength of the local recovery, and as investors wait for US jobs figures which are expected to show the world's biggest economy is improving.
The kiwi fell to 85.58 US cents at 5pm in Wellington from 86.58 cents at the New York close last Friday. It increased from 85.38 cents at 8am and 85.43 cents yesterday. The trade-weighted index rose to 80.12 from 79.94 yesterday, and is heading for a 0.9 percent weekly fall from 80.85 at last week's close.
The local currency fell out of favour on Wednesday when dairy prices fell at Fonterra Cooperative Group's latest online auction to their lowest level in almost a year, taking the sheen off New Zealand's strong economic outlook. Meantime, investors will get another update on the US economy when the government non-farm payrolls report is released on Friday in Washington, which is seen as a gauge of how quickly the Federal Reserve will start moving to normal monetary policy settings.
"The kiwi was as strong as 10 men, now it's had its big rally and the final straw to break the camel's back was the Fonterra announcement," said Michael Johnston, senior dealer at HiFX in Auckland. "The short-term focus is most squarely on the US non-farms, and the kiwi will stay in a tight range until then."
If the US jobs number comes in better than expected, the kiwi will probably extend its decline, though if it disappoints the local currency may gain, HiFX's Johnston said.
