Dollar little changed as traders await Fed minutes for US interest rate clues

The New Zealand dollar was little changed as markets await the release of the US Federal Reserve's minutes on Wednesday for a clue as to whether US interest rates will rise next month.

The kiwi was at 65.32USc at 8am in Wellington, from 65.36USc at the New York close and 65.31USc at 5pm on Friday. The trade-weighted index was at 70.27 from 70.18 on Friday.

This week, investors will be poring over the minutes from the Federal Open Market Committee's July meeting to gauge whether the US central bank will lift interest rates next month. Most bets are for the Fed to lift rates in September. The prospect of higher rates in the US comes as New Zealand's central bank is cutting rates, underpinning a decline in the local currency.

"Expect a quiet start to what is a US dollar-centric week," ANZ Bank New Zealand senior economist Philip Borkin and senior foreign exchange strategist Sam Tuck said in a note. "The focus this week remains firmly on the US dollar. All the releases this week are expected to support September 'lift-off'."

ANZ expects the kiwi to trade between 65-66.10USc today.

Investors will also be keeping an eye on the Chinese currency after moves by China's central bank last week to allow the yuan to trade more freely, which led to a sharp decline.

Over the weekend, the chief economist at the People's Bank of China, Ma Jun, noted that in the future, the yuan will probably move in both directions.

In New Zealand today, the BNZ-BusinessNZ performance of services index is scheduled for release at 10:30am. Later this week, traders will be eyeing Tuesday night's GlobalDairyTrade auction as a gain in NZX whole milk powder futures contracts suggests prices may rise.

The New Zealand dollar edged lower to 88.49Ac from 88.58Ac on Friday ahead of the release of the Reserve Bank of Australia's minutes from its August meeting tomorrow.

The local currency weakened to ¥81.19 from ¥81.24 on Friday ahead of the release of second-quarter Japanese gross domestic product today.

The kiwi advanced to 58.75 euro cents from 58.54 cents on Friday after second-quarter GDP in the euro area rose 0.3%, missing expectations for a 0.4% gain. The kiwi slipped to 41.69 British pence from 41.84p on Friday.

(BusinessDesk)