Dollar falls as US dollar strengthens

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The New Zealand dollar fell to a month low as the US dollar strengthened after Federal Reserve chair Janet Yellen's comments to Congress reiterated that interest rates may rise in December.

The kiwi touched 65.68 US cents, and was trading at 65.72 cents at 8am in Wellington, from 66.58 cents at 5pm yesterday. The trade-weighted index slid to 71.20 from 71.76 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, jumped to a three-month high after Yellen told a congressional hearing on financial regulation that the Fed's upcoming December meeting was a "live possibility" for an interest rate hike. The US dollar was stronger even ahead of Yellen's testimony following upbeat data on the US services sector, while the New Zealand dollar was weaker after prices fell for a second GlobalDairyTrade auction and employment data printed softer than expected.

"That set the NZD on the back foot going into a night of broad US dollar strength," Bank of New Zealand senior market strategist Kymberly Martin said in a note. "The market now prices a 58 percent chance of a December hike. The Fed will become increasingly emboldened in its attempt to finally raise interest rates, if it sees that markets can remain resilient each time it mentions the potential of a December hike. "

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Investors' focus is now on the US nonfarm payrolls report tomorrow, which is closely watched by the Fed. An ADP Research Institute report yesterday showed US companies added 182,000 workers last month, following a 190,000 increase in September. The nonfarm payrolls report is expected to show an increase of 180,000 jobs in October, while the unemployment rate is expected to remain at 5.1 percent.

BNZ says the kiwi has near-term support at 65 US cents.

The New Zealand dollar fell to 91.98 Australian cents from 92.34 cents yesterday. Today, Reserve Bank of Australia governor Glenn Stevens is scheduled to speak at the Melbourne Institute 2015 Economic and Social Outlook Conference, while deputy governor Philip Lowe is taking part at FINSIA's Regulators Panel Discussion in Sydney.

The kiwi slid to 42.77 British pence from 43.16 pence yesterday ahead of the Bank of England's quarterly inflation report and policy review today, where no change is expected.
The local currency fell to 60.55 euro cents from 60.78 cents yesterday, dropped to 79.89 yen from 80.66 yen, and declined to 4.1638 yuan from 4.2163 yuan.