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Kiwi Falls Against Greenback

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, June 24 NZPA - The New Zealand dollar lost about two-thirds of a cent against a broadly strengthening greenback today.

It ended the session on US75.61c from US76.21c yesterday.

The US dollar rose as weak euro zone data took the steam out of last week's euro rally and investors braced for a Federal Reserve statement this week that will likely focus on rising US inflation pressures.

The Fed's inflation mindset when it announces its monetary policy decision should ensure that US interest rates remain unchanged after a string of cuts since mid-September, analysts said. Some analysts were skeptical that the Fed's post-meeting statement would signal a near-term rate hike.

"I doubt if the Fed's statement will highlight more the inflation risks to suggest a near-term rate increase," said Masafumi Yamamoto, head of foreign exchange strategy for Japan at the Royal Bank of Scotland.

"The dollar may face selling once the market recognises that," he said.

Earlier today, reports showed high energy costs had soured German business sentiment and the euro zone's manufacturing and service sectors contracted in June, denting the case for higher euro zone interest rates and punishing the euro across the board.

BNZ currency strategist Danica Hampton said the kiwi initially came under selling pressure overnight after the euro slid against the US currency.

Real money accounts were noted sellers of the NZ dollar out of both Europe and Asia, which helped push the kiwi lower through support at US76c, she said.

Against the Australian dollar, the kiwi dropped below A79.40c early today, near 6-1/2-year lows hit a fortnight ago. It then regained a little lost ground to be at A79.43 from A79.77c at 5pm yesterday.

The trade weighted index ended on 67.86 from 68.17. A raft of releases on consumer confidence, trade, current account and GDP over the next three days will give traders a better picture of the economy.

Economists on average forecast the economy contracted by 0.3 percent in the first quarter and a number below that figure would see the kiwi sold.

The current account deficit is picked to be $1.7 billion in the quarter and $13.2 billion for the year and a trade surplus of $200 million is forecast for May.

NZPA WGT Reuters mjd sml ob

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