Kiwi dollar falls as investors favour greenback

The New Zealand dollar fell as investors bet a strengthening US economy will prompt the Federal Reserve to push up interest rates in the world's largest economy this year.

The kiwi slipped to 76.84 US cents at 8am in Wellington, from 77.02 cents at the New York close and 77.54 cents in New Zealand on Friday. New Zealand markets were closed on January 1 and 2 last week for New Year public holidays. The trade-weighted index was at 78.44.

The US dollar index, which measures the greenback against a basket of currencies, was recently above 91, its highest level in nine years, reflecting investor optimism about a recovery in the US economy. US third-quarter gross domestic product was revised higher heading into Christmas and last week's ISM Manufacturing Index of 55.5 showed the sector remains in expansion.

"As the New Year has opened with a surge of US strength, the New Zealand dollar has suffered along with most of its peers," Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note. "Over the longer term, we continue to expect further NZD/USD weakness."

BNZ expects the kiwi to fall to 70 US cents by the end of 2015 and to 66 cents by the end of 2016, Martin said.

In New Zealand this week, traders will be eyeing Wednesday's GlobalDairyTrade auction and the ANZ Commodity Price Index, while building permit data for November is published on Friday.

The New Zealand dollar weakened to 95.11 Australian cents from 95.34 cents on Friday. The AIG Performance of Manufacturing Index for December is scheduled for release today, with the previous reading only just in expansion at 50.1.

The local currency slipped to 64.01 euro cents from 64.30 cents on Friday, and advanced to 50.11 British pence from 49.84 pence.

The kiwi fell to 92.55 yen from 93.29 yen on Friday ahead of the release of Japan's final Manufacturing PMI for December today.