Hurricane Harvey adds to negative greenback sentiment

The New Zealand dollar rose as Hurricane Harvey caused widespread flooding in the Houston area, adding to negative sentiment for the US dollar already suffering from lack of policy momentum from the Trump administration and the looming showdown on raising the US debt ceiling.

The kiwi dollar gained to 72.53 US cents as at 8am in Wellington from 72.38 cents late yesterday. The trade-weighted index was little changed at 75.88 from 75.86.

The Washington Post reported that the US has until early October to raise the debt limit before the Treasury runs out of money to pay the federal government's bills and debate among lawmakers is likely to see a repeat of the standoffs in 2011 and 2013. Complicating the latest debate is President Donald Trump's frustration at seeing his policy plans stalled. Meanwhile the storm raging over Houston could be causing as much as US$100 billion of damage, making it the worst since Hurricane Katrina, and disrupting a metropolitan area that accounts for about 3 percent of US gross domestic product, said Con Williams, rural economist at ANZ Bank New Zealand.

"The impact is likely to weigh on near-term US data releases creating some additional uncertainties, alongside the political ones, on the underlying performance of the US economy," Williams said in a note. "Both debt ceiling negotiations and reform challenges for the Trump administration, as well as the reduced probability of further Fed interest rate hikes, continue to weigh."

The greenback dropped at the end of last week after Federal Reserve chair Janet Yellen left out any comment on monetary policy in a speech to a central bank symposium in Jackson Hole.

With no local data scheduled for today, the biggest economic event this week is likely to be US payrolls for August, due on Friday, which is expected to show the US economy added 180,000 jobs this month, down from 209,000 in July.

The kiwi dollar fell to 60.58 euro cents from 60.70 cents yesterday. It slipped to 91.08 Australian cents from 91.17 cents and traded at 56.11 British pence from 56.18 pence. The kiwi fell to 4.7937 yuan from 4.8051 yuan and rose to 79.24 yen from 78.96 yen.

(BusinessDesk)