The New Zealand dollar weakened as signs of an improvement in the US economy buoyed speculation the Federal Reserve will start tapering its asset purchases.
The kiwi dropped to 77.45 US cents from 77.73 cents at the 5pm market close in Wellington yesterday. The local currency earlier this morning fell to 77.31 cents, the lowest level since Monday. The trade-weighted index gained to 73.82 from 73.79 yesterday.
The US dollar index, which measures the greenback against the currencies of six trading partners, rose to its highest level in just over a month after a report showed orders placed with US factories rose in May. Traders are closely watching reports this week on the US labour market for indications on when the Federal Reserve may start pulling back on its US$85 billion a month in asset purchases, which has debased the greenback.
A report on US private sector payrolls, which is released tonight New Zealand time, will provide guidance for the main US non-farm payrolls on Friday.
"Tonight, all eyes will be on the US ADP employment report, as an indication of risks around Friday's all-important US payrolls report," Bank of New Zealand strategist Kymberly Martin said in a note. "A soft reading today could see upward momentum in the US dollar tempered."