Kiwi edges up against greenback as US economy improves

The New Zealand dollar rose from a 7.5-week low against the greenback as investors gauged the strength of the US economy and the prospects of an early end to the Federal Reserve's quantitative easing programme.

The kiwi rose to 83.05 US cents at 5pm in Wellington from 82.71 cents at 8am and 82.98 cents on Friday in New York. The trade-weighted index increased to 77.67 from 77.56 last week.

The Dollar Index, a measure of the greenback against a basket of currencies, rose to 83.23 from 82.69 last week amid mounting speculation the Fed is mapping out an end to its $US85 billion a month money printing programme.

Investors are starting to be swayed by the improving economic data in the world's biggest economy, and traders will get another update on the health of the US economy when retail sales figures are released in Washington overnight.

"We're five years into the QE programme and we're much closer to the end of ultra-loss monetary policy from the US central bank," says Dan Bell, currency strategist at HiFX in Auckland. "There's a lot more downside potential for the kiwi over the next six to 12 months than upside."

A BusinessDesk survey of five strategists predicts the kiwi may trade between 81.50 US cents to 84 US cents this week with a downside bias this week because of the growing strength of the greenback.

Investors will also be looking at New Zealand's first-quarter retail sales figures when they are released tomorrow, with economists predicting a 0.8 percent increase, according to a Reuters survey.

New Zealand's median house sale prices rose 7 percent in April from a year ago, as Auckland and Christchurch continued to fuel the national market with demand unmatched by the level of supply.

The property market is seen as a potential threat to the country's financial system and the Reserve Bank is contemplating the introduction of tools to help quell any bubble, such as a limit on high loan-to-value-ratio lending.

The kiwi gained to 83.07 Australian cents at 5pm in Wellington from 82.77 cents in late New York trading on Friday and advanced to 84.49 yen from 83.29 yen. It increased to 63.99 euro cents from 63.86 euro cents last week and was little changed at 54.09 British pence from 54 pence.

(BusinessDesk)