Dollar falls as US manufacturing data, Fed speakers loom

The New Zealand dollar fell ahead of US manufacturing figures, which are expected to show industrial production is growing in the world's biggest economy, and speeches by two Federal Reserve officials.

The kiwi traded at 78.08 US cents at 5pm in Wellington from 78.17 cents at 8am, and down from 78.49 cents on Friday in New York. The trade-weighted index declined to 78.28 from 78.37 last week.

Traders are watching the Institute for Supply Management's manufacturing survey, and expect the series will show more expansion in November, albeit at a slightly slower pace than in October, before separate speeches by Fed vice chair Stanley Fischer and New York Fed President William Dudley for a view on the central bank's outlook on the global and US economies. Investors are gearing up for higher interest rates in the US next year as economic data points to a stronger recovery, and that has been a key driver in supporting the greenback in recent months.

The ISM manufacturing survey and speeches from the US Fed officials kick off a very busy week, and will be the main feature for traders in the Northern Hemisphere session, said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "We're expecting it (the ISM manufacturing survey) to be a little weaker than the market is, which should provide support for the kiwi/US."

A series of central bank meetings and economic data will culminate in the US non-farm payrolls report on Friday, though ANZ's Tuck said traders will probably refrain from taking any major positions until the Federal Open Market Committee reviews monetary policy on Dec. 18.

New Zealand government figures today showed the nation's terms of trade retreated from a 40-year high in the third quarter, as export dairy and log prices fell faster than import prices.

Separately, Reserve Bank governor Graeme Wheeler reiterated his view that the local currency is unsustainably and unjustifiably high in a speech on inflation, and said macro-prudential tools will become more important to help manage asset bubbles as the central bank's influence on long-term interest rates remains limited relative to global markets.

Chinese manufacturing data today was a little weaker than expected, and weighed on the Australian dollar more than the kiwi, and should keep the pressure on both currencies, Tuck said.

The kiwi gained to 92.86 Australian cents from 92.21 cents on Friday in New York ahead of tomorrow's Reserve Bank of Australia policy review. The RBA isn't expected to shift its stance on rates, keeping the target cash rate at 2.5 percent.

The local currency declined to 92.86 yen at 5pm in Wellington from 93.10 yen last week, and fell to 62.69 euro cents from 63.02 cents. It traded at 50.01 British pence from 50.15 pence on Friday in New York.

(BusinessDesk)