NZ dollar falls as weak US data saps confidence

Photo / Dean Purcell

The New Zealand dollar fell against the greenback after poor manufacturing data out of the UK and US doused the upbeat mood of global markets seen after officials in Washington agreed on a deal to lift the debt ceiling.

The run of soft factory data started in the UK with the Markit/Cips manufacturing purchasing managers' index for July falling to 49.1, down from 51.4 in June.

That was followed by announcement from the Institute for Supply Management, which said its index of US national factory activity fell to 50.9 in July from 55.3 in the previous month, short of the 54.9 expected.

The data saw global markets gave up their early gains, with the Standard & Poor's 500 Index falling 0.2 per cent to 1,286.94, and Europe's Stoxx 600 dropping 1.2 per cent to 262.02, sapping demand for growth-linked currencies, with the kiwi and Australian dollar declining almost in tandem. The antipodean currencies were also dented by softer commodity prices, with the 19-commodity Thompson Reuters CRB Index falling 0.2 per cent to 341.41.

"It all started in the European session with the poor PMI out of UK, and then moved into US with ISM, which was very weak, sparking general concerns about global growth," said Mike Burrowes, a market strategist with Bank of New Zealand. "Just to spice things up, the US dollar acted as a safe haven currency again, and the kiwi just tracked those global moves."

The kiwi recently traded at 87.57 US cents, down from 88.16 cents yesterday, and fell to 74.79 on the trade-weighted index of major trading partners' currencies from 74.98.

It was little changed at 79.82 Australian cents from 79.80 cents yesterday, and rose to 67.48 yen from 68.35 yen. It gained to 61.36 euro cents from 61.25 cents yesterday, and climbed to 53.72 pence from 53.60 pence previously.

Data-wise, the main focus of the day will be the Reserve Bank of Australia's rates announcement this afternoon, with the bank expected to keep rates on hold although it may signal that it could start hiking before the end of the year, Burrowes said.

The government is also set to release the Labour Cost Index and Quarterly Employment Survey for the June quarter today, although the focus will likely be on the unemployment data for the period, which is released in the Household Labour Force due on Thursday.

The kiwi may trade between a range of 87.30 US cents and 87.90 cents, Burrowes said.