Dollar hovers near 70USc as greenback weakens

The New Zealand dollar gained, hovering under 70USc, as traders ditch the US dollar after weak labour market data pushed out the timing of future US interest rate hikes.

The kiwi touched a month-high of 69.84USc overnight and was trading at 69.69USc at 8am in Wellington, from 69.24USc at 5pm yesterday. The trade-weighted index advanced to 74.12 from 73.75 yesterday.

The US dollar sank after US labour market data released on Friday showed employers in the world's largest economy added just 38,000 workers in May, the lowest level since September 2010 and below the 164,000 expected by economists in a Reuters survey. That has prompted traders to scale back their bets for imminent US interest rate hikes. Locally, most economists expect New Zealand's Reserve Bank will keep interest rates on hold tomorrow, holding back on further cuts until later in the year, and helping underpin the kiwi for now. That sentiment has intensified after the Reserve Bank of Australia kept rates on hold yesterday.

"The US dollar has been on the backfoot since Friday's payrolls and that is currently persisting in the market so we've got a weak US dollar against pretty much all the currencies and kiwi is just benefiting from that," said Martin Rudings, senior dealer, foreign exchange at OMF. "Most people are expecting no rate cut tomorrow out of the Reserve Bank and we saw that out of the Reserve Bank of Australia yesterday and the Aussie appreciated on the back of that and I think the kiwi is probably setting itself up for the same thing."

Mr Rudings said 14 economists expect New Zealand rates to remain on hold tomorrow, while eight expect a cut.

"The market is pricing in a 100% of a chance of a cut later on in the year, about August, but at the moment if they do not go tomorrow, then the kiwi is going to remain firm against the US dollar."

Rudings said the kiwi could move to its resistance level of 70.50USc in the next 24 hours.

In New Zealand today, first quarter manufacturing data is released. Japan has first quarter GDP data, China has trade data for May and the UK releases industrial production data for April.

The New Zealand dollar edged up 93.44Ac from 93.24Ac yesterday, increased to 61.35 euro cents from 60.96 cents, gained to 47.92 British pence from 47.66 pence, rose to ¥74.79 from ¥74.55, 4.5793 yuan from 4.5492 yuan.

(BusinessDesk)