Kiwi falls on better US data, eurozone optimism

BUSINESSDESK: The New Zealand dollar fell after signs of life in the US economy sapped expectations for more monetary stimulus and as investors decipher clues about Europe's plans to tackle its debt crisis.

The kiwi fell to 80.65 US cents at 8am from 80.72 cents at the close of trading in New York and 80.91 from 5pm on Friday. It dropped to 65.31 euro cents from 65.35 cents at the close in New York and 65.55 cents on Friday.

The trade weighted index declined to 72.89 from 72.99.

Upbeat consumer confidence on Friday added to the string of better-than-expected US data, which has eroded speculation the Federal Reserve will increase its monetary stimulus. Investors are preparing for the latest minutes from the Federal Open Market Committee meeting on Wednesday.

Traders are reluctant to change their bets before the Fed's next summit in Jackson Hole, Wyoming, at the end of August.

"Any change in QE3 will be reflected in the kiwi/US cross," says Stuart Ive, currency strategist at HiFX. "Data out of the US on Friday indicated that it may be turning to the positive side reducing the expectation of QE3."

The euro extend gains on optimism policymakers are closer to finding a solution for the debt crisis, even as German Finance Minister Wolfgang Schaeuble ruled out another aid programme for Greece. German, Greek and French policymakers will meet later this week.

"There is a definite euro-wide decision to make to this thing succeed," Mr Ive says. "They just have to decide on a line of thought."

He says the New Zealand dollar is likely to trade in a range of between 80.30 US cents to 81.40 cents, finishing the week higher on "the basis that we see positive overtones coming out from the Europeans".

In New Zealand, the BNZ-Business NZ Performance of Services Index for July will be released this morning. The series' sister survey, the manufacturing index, slipped into contraction in July, falling to its lowest level in three-months.

The kiwi was little changed at 77.37 Australian cents from 77.33 cents at the close of trading in New York and was largely the same at 51.38 British pence from 51.35 pence. It went to 64.19 yen from 64.12.