NZ dollar: Kiwi dips in local trading

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The New Zealand dollar extended losses through the local trading session as strong US data on Friday dimmed expectations the Federal Reserve will embark on another round of printing money, while Fonterra Cooperative Group cut this season's forecast payout to farmers.

The kiwi fell to 81.79 US cents at 5pm from 82 cents at 8am, and was down from 82.10 cents at the close of trading in New York. The trade-weighted index declined to 72.98 from 73.10 last week.

The Dollar Index, a measure of the greenback against a basket of six currencies, climbed 0.8 per cent to a two-month high 80.03 after strong employment figures on Friday. That damped expectations the Federal Open Market Committee will see a need for more stimulus when it reviews monetary policy on Wednesday in the US, sapping investors' appetite for risk-sensitive assets, including the kiwi.

The local currency took a knock after Fonterra, the world's biggest dairy exporter, trimmed 15 cents from its farmgate milk price to $6.35 per kilogram of milk solids, while keeping the distributable profit in a range of 40 cents to 50 cents a share. Foreign dairy sales account for about a quarter of New Zealand's annual export receipts.

Given the run of positive US data, "there's no case for QE," said Imre Speizer, market strategist at Westpac Banking. "I expect the kiwi dollar to weaken for the week, with the main driver being moves in the US dollar."

Five of six analysts surveyed by BusinessDesk expect the kiwi will decline this week as US data continues to improve, and figures out on Monday in the US are expected to show 1 per cent growth in retail sales last month.

Speizer said the market has started to tentatively price in rate hikes by the Fed, with 16 basis points of increases over the coming 12 months expected, according to the Overnight Index Swap curve.

"The Fed doesn't want to engender a strong dollar just as its recovery takes hold, and there's been a fair bit of jawboning" to keep the greenback in check, he said.

The New Zealand dollar was little changed at 77.60 Australian cents from 77.62 cents last week, and declined to 67.31 yen from 67.66 yen. It slipped to 62.49 euro cents 62.55 cents last week, and decreased to 52.19 pence from 52.37 pence.