Dollar climbs above 67USc; greenback falls on view Fed will take longer to hike

The New Zealand dollar rose above 67USc as traders delayed their expectations for US interest rate hikes, broadly weakening the greenback.

The kiwi touched 67.07USc late on Friday in New York and was trading at 66.53USc at 8am in Wellington, from 66.82USc at the New York close, and 66.24USc in Wellington at the end of last week. The trade-weighted index rose to 71.63 from 71.32 on Friday.

The US dollar index, which measures the greenback against a basket of currencies, touched its lowest level in almost two months after traders pushed out their expectations for US interest rate hikes on last week's softer-than-expected minutes to the Federal Reserve's July meeting. Global sharemarkets weakened amid concern about the impact of slowing growth in China.

"The US dollar is being sold," said Derek Rankin, director at Rankin Treasury Advisory. "The market has been expecting the Federal Reserve to raise interest rates at some stage this year. The odds of it raising in September is now diminishing rapidly and expectations are moving to December. All year people have actually expected interest rates to go up and the problem they have got is they have no inflation to justify it."

Investors now see a 34% chance the Fed will hike at its September meeting, down from almost 50% at the start of last week, futures show, while the probability of an increase at or before the Fed's December session fell to about 60% from 74%, according to Bloomberg on Friday.

"The data has just been overwhelmingly not supportive of them raising interest rates," Mr Rankin said. "Demand is falling and it is very low around the world. A sell off in world sharemarkets raises concerns about world conditions."

The kiwi also rose because a number of investors were betting on its decline and had to buy back the currency as it gained to limit their losses, Mr Rankin said.

"If it gets above 67.50USc with any kind of speed this week, then it will be out of the downtrend," he said.

In New Zealand today, Reserve Bank deputy governor Grant Spencer is giving a speech about the property market.

The New Zealand dollar advanced to 91.25Ac from 90.49Ac on Friday, gained to 42.42 British pence from 42.20p, slipped to ¥80.97 from ¥81.42, was little changed at 58.82 euro cents from 58.68 cents, and rose to 4.2504 yuan from 4.2384 yuan.

(BusinessDesk)