New Zealand Dollar (NZD) Exchange Rate Edges away from Three-Week High against US Dollar
Last week’s disappointing economic reports for the US left the New Zealand Dollar (NZD) exchange rate trending in a stronger position against the US Dollar (USD) as the weekend approached.
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The New Zealand Dollar to British Pound (NZD/GBP) exchange rate was also riding high as fluctuating speculation surrounding the prospect of a Bank of England interest rate increase kept pressure on the Pound.
However, overnight the ‘Kiwi’ eased lower against several of its currency counterparts following the release of disappointing domestic data.
The New Zealand Dollar to US Dollar (NZD/USD) exchange rate fell from a three-week low as New Zealand’s business confidence and activity outlook measures slumped.
The NBNZ Business Confidence Index eased from 53.5 in May to 42.8 in June while the ANZ Activity Outlook gauge slumped from 51 to 45.8.
The decrease in domestic business confidence saw Australia New Zealand (ANZ) economist Cameron Bagrie observe; ‘Optimists continue to significantly outnumber pessimists, but overall business confidence is now well off its highs.’ Bagrie cited falling dairy prices and higher interest rates as reasons for the decline in sentiment.
Separate economic data for New Zealand showed that the level of building permits issued in the nation declined by 4.6% in May, month-on-month. A drop of 2.5% had been anticipated.
This followed a positively revised 1.9% month-on-month increase in permits the previous month.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate was up 0.33% as European trading kicked off on Monday and held gains even as UK Mortgage Approvals were shown to have fallen to an 11-month low.
Later today some additional NZD/USD movement could take place following the publication of US Pending Home Sales figures. The data is expected to show a 1.2% month-on-month increase in pending home sales in May.
However, recent US reports (like last week’s GDP figures) have fallen wildly short of the mark.
If today’s data should also come in below expected levels it would add to the argument in favour of the Federal Reserve leaving interest rates on hold and could cause additional weakness in the ‘Greenback’.
Economic reports for New Zealand to be aware of as the week continues include the nation’s commodity-price figures.
With domestic news being in short supply, ‘Kiwi’ volatility is more likely to be occasioned by global developments, including the Reserve Bank of Australia’s interest rate announcement and China’s non-manufacturing and manufacturing PMI.
The New Zealand Dollar (NZD) Exchange Rate is currently trading against the British Pound in the region of 0.5136 and is trading against the US Dollar in the region of 0.8740.
Updated at 11:27 GMT, on July 1, 2014
The ‘Kiwi’ has seen a disappointing start to the week, dropping lower against the ‘Aussie’ after less-than-impressive domestic data proved to be its downfall.
‘Kiwi’ movement is likely to be restrained this week due to a lack of data releases for New Zealand, with only Tuesday’s Weekly Consumer Confidence Index (which fell to 105.4 from 105.7) and Wednesday Commodity Prices data to be aware of. The Commodity Price report may be subject to a decline.
The US Dollar hasn’t been performing particularly strongly in recent weeks on the back of disappointing data releases, with the US first quarter growth data being a particular disappointment given that it showed a 2.9% contraction in the first three months of 2014. The ‘Kiwi’ has therefore been able to gain extensively against the US Dollar. The New Zealand Dollar reached its three year high on June 27th at 0.8796.
Moreover positive Chinese Manufacturing data has given a new boost to the New Zealand Dollar against the ‘Buck’ as commodity demand should remain stable as China is New Zealand’s largest export destination.
Governor for the Reserve Bank of New Zealand Graeme Wheeler commented in a dairy farming conference in May: ‘If the currency remains high in the face of worsening fundamentals, such as a continued weakening in export prices, it would become more opportune for the Reserve Bank to intervene in the currency market to sell New Zealand Dollars.’
The ‘Kiwi’ will remain reliant on US Dollar movements and commodity price indications to dictate its worth for the remainder of the week as it sits quietly in the background by way of data publishing.
The ‘Kiwi’ is currently trading at 0.8760 against the US Dollar, 0.5109 against the Pound and 0.9267 against the ‘Aussie’.