The New Zealand dollar gained after weaker-than-expected US durable goods figures prompted some investors to bet a slower pace of economic growth may prompt the Federal Reserve to push out plans to taper its bond purchases.
The kiwi advanced to 78.46 US cents at 8am in Wellington from 78.23 cents at the 5pm close yesterday. The trade-weighted index rose to 74.03 from 73.83 yesterday.
The New Zealand dollar gained against all the G10 currencies overnight as fears diminished that last week's sell off in emerging markets may spread after Brazil, Indonesia and India took action to support their economies. Meanwhile in the US, the weaker durable goods report last night following softer housing data last week suggests economic growth may not have accelerated as much as expected in the quarter, which could lead the Fed to retain its stimulus for longer.
"There was brief weakness in the US dollar after durable goods and that pop was sustained in the New Zealand dollar," said Sam Tuck, senior manager FX at ANZ New Zealand.
"We would expect the New Zealand dollar to trade higher this week, and that's what we saw last night."
Traders are questioning whether the Fed may start tapering its US$85 billion a month bond buying programme later than September on concern about the fragility of the country's economic recovery, Tuck said.
Comments emerging from the weekend meeting of central bankers at Jackson Hole suggested many countries were concerned that an early tapering could stymie a nascent recovery, he said.
Investors will be eyeing upcoming data for further indications on the pace of the US recovery, including the Richmond Fed and consumer confidence tonight and the Chicago purchasing managers survey on Friday, Tuck said.
Next week's releases include US payrolls and manufacturing, ahead of the Federal Open Market Committee meeting on Sept. 17-18.
Some investors in the US may be unwinding their currency positions this week heading into the end of the month and the long Labor Day weekend.
The New Zealand rose to 86.99 Australian cents at 8am in Wellington from 86.51 cents at 5pm yesterday and advanced to 77.24 yen from 77.17 yen. The kiwi increased to 58.71 euro cents from 58.47 cents yesterday and gained to 50.40 British pence from 50.25 pence.