Dollar dips on better than expected US data

The dollar dipped as another upbeat US economic report kept investors optimistic the Federal Reserve will raise interest rates before the end of the year, stoking demand for the greenback.

The kiwi declined to 71.69USc at 8am in Wellington from 71.87USc yesterday.

The trade-weighted index edged down to 76.42 from 76.53.

The US ISM non-manufacturing index delivered a reading of 57.1 in September, beating the 53 level economists were predicting and giving investors heart the Fed will proceed with a rate hike in November or December.

That added to growing support for an increase in rates after non-voting Fed official Jeffrey Lacker told reporters earlier this week that he favoured a hike last month.

US non-farm payrolls on Friday will be watched for further confirmation higher interest rates are on their way.

"The non-manufacturing ISM jumped to its highest level in nearly a year, suggesting August's weakness was an aberration," ANZ Bank New Zealand senior economist Sharon Zollner says.

"As long as US rate hike expectations are creeping up, the NZD/USD looks likely to continue to grind lower."

New Zealand's currency dropped to a seven-week low yesterday after prices unexpectedly fell at the latest GlobalDairyTrade auction, raising concerns about the outlook for the country's biggest export commodity, and amid speculation the European Central Bank may scale back its quantitative easing programme, which would push interest rates higher and reduce the appeal of the kiwi.

The New Zealand dollar was little changed at 63.89€c from 64.05€c yesterday.

The kiwi was little changed at 56.20 British pence from 56.22 pence yesterday, having retreated from its highest level in decades on fears UK Prime Minister Theresa May's exit from the European Union and focus on curbing immigration would cut the country out of the single market.

The New Zealand dollar traded at 94.03Ac from 94.11Ac yesterday and rose to 74.31 yen from 73.87 yen. It dropped to 4.7800 Chinese yuan from 4.7927 yuan yesterday.

(BusinessDesk)