Kiwi dollar slips after double hit

BusinessDesk

1 Aug, 2014 05:00 PM2 mins to read

The New Zealand dollar was headed for a 0.8 per cent weekly decline as more buoyant US figures bolstered demand for the greenback and kiwi sentiment was dented by Fonterra Co-operative Group cutting its forecast payout and speculation that the Reserve Bank will make good on hints it will intervene in the currency market.

The kiwi slid to US84.95c at 5pm in Wellington, from US85.60c at 8am on Monday and above US88c last month.

The trade-weighted index slipped to 79.71 from 79.90 on Monday.

While lower commodity prices and intervention talk weighed on the kiwi locally, better economic figures from the US increased demand for the greenback.

A report this week showed the US economy expanded at a 4 per cent annual rate in the second quarter, beating the 3 per cent expectation of economists in a Reuters poll and after shrinking 2.1 per cent in the first quarter.

"There was a combination of good US data in the form of GDP and really bad domestic news," said Bancorp Treasury Services senior adviser Peter Cavanaugh.

"The New Zealand-US exchange rate is lower for those two reasons. It ended last week on a negative note and it has been downhill traffic all the way."

Still, Cavanaugh said, the kiwi was ending the week on a less negative note because of how far it has fallen in a short time.

"So far it's been no more than a correction but it is straining the uptrend," he said.

While the Reserve Bank signalled a pause in its tightening cycle after raising the benchmark interest rate last week, rates are still expected to move higher, and the kiwi has retained buyer support around its 200-day moving average of US84.50c.

Overnight, the focus was on US non-farm payroll figures, with economists in a Reuters poll expecting America to have added 233,000 jobs last month.

Currencies were more likely to react if the jobs number fell short of expectations, Cavanaugh said.