NZ dollar slips as US dollar gains on upbeat housing data

File photo / NZ Herald

The New Zealand dollar fell as the greenback strengthened following better-than-expected US housing data, boosting optimism the world's biggest economy may be recovering after a weak first quarter.

The kiwi slipped to 73.35 US cents at 8am in Wellington, from 74.20 cents at 5pm yesterday. The trade-weighted index declined to 75.94 from 76.39 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, touched a two-week high of 95.474 after a report showed US housing starts reached their highest level in 7 1/2 years in April, stoking optimism the world's largest economy may be gaining momentum after a weaker first quarter.

Tonight, traders will be focused on the release of the Federal Reserve minutes to its last meeting, for clues to when it may raise interest rates.

"The kiwi is a little weaker but it's more a case of US dollar strength," said Peter Cavanaugh, client adviser at Bancorp Treasury Services.

"The US dollar picked up on better-than-expected housing data - it's just given it a bit of a fillip."

Overnight, prices fell an average 2.2 per cent in the fortnightly GlobalDairyTrade auction, led by a 3.6 percent decline in skim milk powder prices.

Still, the price for whole milk powder, New Zealand's key export product, slipped just 0.5 per cent.

"The price action was a little more encouraging for whole milk powder and suggests that a trough is near, but a sharp imminent rebound seems a distant prospect," ANZ Bank New Zealand agri economist Con Williams said in a note.

"Taken with New Zealand dollar strength in recent months, we expect more conservatism to be applied to next week's opening Fonterra milk price forecast for 2015/16."

Auckland-based Fonterra Cooperative Group is expected to publish its forecast for next season following its May 27 board meeting.

ANZ's Williams expects Fonterra to pay between $5.00 per kilogram of milk solids and $5.25/kgMS for the upcoming 2015/16 season, which he says will be "very challenging for many operations", coming after this season's payout of $4.50/kgMS.

The New Zealand dollar slipped to 92.66 Australian cents from 92.83 cents yesterday.

Australia has a consumer confidence survey today and Reserve Bank of Australia deputy governor Philip Lowe is the panel moderator at The Future of International Governance and the G20 conference in Sydney.

The kiwi advanced to 65.80 euro cents from 65.63 cents after European Central Bank executive board member Benoit Coeure said the bank would buy more securities in May and June, ahead of the decline in market liquidity over the European summer.

The local currency edged lower to 47.30 British pence from 47.39 pence yesterday ahead of the Bank of England's publication of the minutes to its last meeting.

The kiwi weakened to 88.56 yen from 89 yen yesterday ahead of Japanese first quarter gross domestic product data today.