NZ dollar weakens as commodity prices fall

The kiwi touched a high of 66.73 US cents over the weekend, and was trading at 65.88 cents at 8am in Wellington, from 65.82 cents at the New York close and 65.87 cents at 5pm on Friday. Photo: NZ Herald.

The New Zealand dollar fell after signs of weaker Chinese manufacturing activity weighed on commodity prices, denting demand for commodity currencies.

The kiwi slipped to 65.71 US cents at 8am in Wellington, from 65.76 cents at the New York close and 65.81 cents at 5pm on Friday. The trade-weighted index edged lower to 70.18 from 70.22.

Commodity currencies have been downbeat since the preliminary China Caixin purchasing managers' index weakened on Friday, raising concern that a slowing Chinese economy will reduce global demand for raw materials.

The CRB commodities index fell 0.9 per cent to a six-year low, driven by broad based falls that spanned grains, energy, soft commodities and iron ore.

Precious metals such as gold, silver and platinum bucked the trend, though West Texas Intermediate crude oil futures and Brent oil prices both declined.

"Global commodity prices continue to drive New Zealand dollar (and other commodity currencies) lower," ANZ Bank New Zealand senior economist Mark Smith and senior foreign exchange strategist Sam Tuck said in a note.

"The question is if and when commodity prices will find a base. Until that occurs New Zealand dollar will remain under-pressure."

ANZ expects the kiwi to trade between 65.20 US cents and 66.20 cents today.

Tonight, traders will be eyeing the German IFO business sentiment survey for July and a gauge of US durable goods orders for June.

The New Zealand dollar advanced to 90.39 Australian cents from 90.20 cents on Friday as weaker commodity prices weighed more heavily on the Aussie currency..

The kiwi fell to 59.81 euro cents from 59.98 cents on Friday, declined to 42.35 British pence from 42.43 pence, and edged lower to 81.23 yen from 81.55 yen.