Dollar heads for 0.7% monthly gain in November, bouncing back from mid-year slide

The New Zealand dollar is heading for a 0.7 percent monthly gain against the greenback, recovering some of its mid-year slump, as large global funds start preparing to rejig their portfolios for the end of the calendar year, though the downward trend remains intact.

The kiwi rose to 78.32 US cents at 5pm in Wellington from 77.80 cents at the end of October. It traded at 78.69 cents at 8am and 79.11 cents yesterday. The trade-weighted index is heading for a 2.1 percent monthly gain to 78.32 from 76.72 at the end of October, and was down from 78.72 yesterday.

The local currency has dropped about 12 percent from a peak in early July as investors started pre-empting higher US interest rates by buying the greenback. The strong support for the US currency is expected to see global fund managers pare back their greenback holdings in the lead-up to the end of the year as they reposition their portfolios.

"Where we had the big drop a month or two ago where we went down in a straight line, that's run its course," said Michael Johnston, senior trader at HiFX in Auckland. "We expect the kiwi to ultimately push lower, but it's going to trade in a 2 or 3 US cents range, we're going to have bounces from time to time, but we are going to head lower."

The local currency has been a beneficiary from investors selling the euro and yen on the prospect of quantitative easing from the European Central Bank and more expansionist policy from the Bank of Japan, and is almost unchanged on a trade-weighted basis this week. The kiwi fell to 62.91 euro cents at 5pm in Wellington from 63.24 cents yesterday, and dropped to 92.65 yen from 92.84 yen.

New Zealand government data today showed a pick-up in new building consents in October as the sector regained confidence after the Sept. 20 general election created some uncertainty, and the ANZ Business Outlook also showed firms were more upbeat this month.

The kiwi is heading for a 0.6 percent decline against the greenback this week as weak German inflation and falling oil prices yesterday weighed on the euro and dragged down the local currency.

US markets are expected to be quiet on Friday as traders take the day off after yesterday's Thanksgiving Day holiday, and investors are waiting for more European inflation figures during the London trading session.

On Monday morning Reserve Bank of New Zealand governor Graeme Wheeler will deliver a speech reflecting on the past 25 years of inflation targeting, kicking off a busy week including central bank meetings in Europe, Australia and the UK, US employment figures and Chinese manufacturing data.

The local currency declined to 49.89 British pence at 5pm in Wellington from 50.09 pence yesterday, and was little changed at 92.18 Australian cents from 92.14 cents.

(BusinessDesk)