Kiwi dollar rises with greenback out of favour

The New Zealand dollar has benefited from rising commodity prices in recent sessions. Picture / Mark Mitchell

The New Zealand dollar rose in Asian trading as risk appetite remained strong and the US dollar remains out of favour, further weighed by weaker-than-expected jobs data overnight Friday.

The local currency traded at US71.78c at 5pm versus US71.63c at 8am and US71.67c on Friday in New York. The trade-weighted index was at 74.57 from 74.44 Friday.

The US dollar has struggled to gain traction so far this year and came under further pressure when data on Friday showed the world's biggest economy added 148,000 jobs in December, missing expectations.

Martin Rudings, senior dealer foreign exchange at OMF in Wellington, said, however, the greenback's weakness is puzzling, given the tax package and expectations for further rate increases in the US. He noted that trading is very light, which increases volatility.

Meanwhile, the kiwi may come under some pressure as it looks like the Thomson Reuters core commodity CRB Index "might have topped out on Friday when it gapped lower after quite a few increases took it too new highs. It looks like a reversal could be in play," he said.

Both the New Zealand dollar and the Australian dollar have benefited from rising commodity prices in recent sessions, with the Australian dollar just below a three-month high against the greenback and the kiwi up about 2 per cent against the US dollar since just before the Christmas holiday.

While Asia have overlooked the possible slide in commodity prices, there could be some impact in London or New York, Rudings said.

"I think it's a warning sign. If the commodity index is going to turn down then the kiwi and the Aussie won't be far behind it," he said.

With little local data on the immediate horizon, investors will be watching for US consumer prices and retail sales data on Friday in the US.

The local currency traded at 81.24 yen versus 81 yen Friday and at 4.6569 Chinese yuan from 4.6470 Chinese yuan and rose to A91.43c from A91.21c on Friday in New York. It traded at 59.65 euro cents from 59.55 cents last week and at 52.91p from 52.78p.

New Zealand's two-year swap rate was unchanged at 2.17 per cent while the 10-year swap was unchanged at 3.12 per cent.