The New Zealand dollar held at six-month lows overnight ahead of trade data today which could put the local currency under further pressure.
The kiwi was little changed at 83.41 US cents at 8am in Wellington, from 83.45 cents at 5pm yesterday. The trade-weighted index edged lower to 78.75 from 78.78 yesterday.
The New Zealand dollar fell sharply yesterday amid US dollar strength as investors bet an improving US labour market may prompt the Federal Reserve to raise interest rates sooner than previously expected. The kiwi is now back at levels last seen before the Reserve Bank began raising interest rates in March, as expectations for economic growth are pulled back following lower prices for commodity exports such as dairy and logs. July trade data out today is likely to reflect the slump in dairy prices and put further pressure on kiwi, analysts said.
"The New Zealand dollar was the weakest performing currency at the start of the week," Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note. "The New Zealand dollar is the victim of continued US dollar strength at the start of the week. Today's release of the New Zealand trade balance is not likely to do too much to support the New Zealand dollar.
"Below current levels there is not too much in the way of technical support for the NZD/USD until a strong band at the 82-82.40 level. Resistance lies at 84.10."
Bank of New Zealand expects the trade balance to turn to a $979 million deficit in July from a $247 million surplus in June. The report is released at 10:45am.
The New Zealand dollar rose to 89.71 Australian cents from 89.55 cents yesterday, after touching 89.48 cents, its lowest level since early December last year.
The kiwi was little changed at 63.21 euro cents from 63.18 cents yesterday and at 50.30 British pence from 50.37 pence. The local currency slipped to 86.73 yen from 86.97 yen yesterday.
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