The New Zealand dollar advanced after weaker than expected US housing sales data raised concerns the Federal Reserve may not start tapering its monetary stimulus next month.
The kiwi rose to 78.11 US cents at 8am in Wellington from 77.99 cents at the New York close and 78.30 cents on Friday. The trade-weighted index slipped to 73.62 from 73.99 on Friday.
The US dollar index, which measures the greenback against a basket of currencies, fell sharply after a report showed new home sales in the US dropped more than expected in July and the data for the previous three months was revised downwards. That raised concerns about the strength of the US economy and the likelihood that the Fed will start to pull back on its US$85 billion a month bond-buying programme as early as next month.
"The slump in sales, despite an apparent shortage of established dwellings on the market, could be a further sign that higher mortgage rates are nipping the nascent housing recovery in the bud," Imre Speizer, Westpac Banking Corp senior currency strategist, said in a note. The report was "enough to jolt the market into reassessing the chances of Fed tapering starting in September."
The US report showed new home sales plunged 13.4 percent in July, well below the expected 2 percent fall and at the lowest level since October 2012.
