NZ dollar falls as greenback rebounds from sell-off in truncated trading week

The New Zealand dollar fell as investors changed their tune on the greenback, having sold it aggressively when minutes to the Federal Reserve's October policy meeting indicated US interest rates would rise at a slower pace than expected.

The kiwi dropped to 65.11 US at 5pm in Wellington from 65.56 cents at 8am, and 65.63 cents on Friday in New York. The trade-weighted index declined to 70.99 from 71.57 last week.

The Dollar Index, a measure of the greenback against a basket of currencies, climbed to its highest level since mid-March today as traders reassessed their reaction to the Federal Open Market Committee minutes on Thursday. That comes in a truncated trading week with US markets closed for the Thanksgiving Holiday on Thursday, pushing US economic data to a Wednesday release. US employment data next week is seen as the next major report to firm up whether the Fed will hike interest rates when it meets next month.

"Late last week after the FOMC, the US dollar did ease on Thursday and Friday, and markets have concluded that that was the wrong direction, and are buying US dollar at the moment," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "The broad theme we're expecting for the week is just 'wait and see' - the US dollar started this week strong but we believe that positioning in the run-up to next week's data means the US dollar can't get too much stronger and will probably back-off towards the end of the week."

A BusinessDesk survey of 11 currency analysts predicts the local currency will trade between 64.30 US cents and 67.10 cents this week. Five expect it to gain, two say it may fall and four are betting it will remain largely unchanged.

The local currency dropped to 61.35 euro cents from 61.63 cents on Friday in New York, having climbed to a month-higher after European Central Bank president Mario Draghi said the monetary authority will do what it takes to raise inflation in the region, stoking speculation it will expand its asset purchase programme. The ECB reviews monetary policy next week.

The kiwi was little changed at 90.68 Australian cents from 90.61 cents on Friday in New York, and fell to 4.1599 Chinese yuan from 4.1895 yuan. It decreased to 80.21 yen from 80.65 yen last week, and slipped to 42.93 British pence from 43.19 pence.

New Zealand's two-year swap rate was unchanged at 2.72 percent at 5pm in Wellington, and 10-year swaps were also steady at 3.6 percent.

(BusinessDesk)