The New Zealand dollar fell, dipping below 73 US cents, as US Treasury yields reached their highest levels in almost two months and manufacturing data beat expectations, driving up the greenback.
The kiwi traded at 72.94 US cents as at 8am in Wellington, from 73.17 cents late yesterday. The trade-weighted index was at 78.33 from 78.36.
US Treasuries have tumbled in the past week, pushing the yield on the 10-year Treasury note up to 2.35 per cent from 2.14 per cent at the start of last week, amid growing expectations the era of extraordinary monetary stimulus in the wake of the global financial crisis is coming to an end and the Federal Reserve and other major central banks will be raising interest rates as growth and inflation return.
Overnight, figures showed the US ISM manufacturing index rose to 57.8 in June, the highest since August 2014 and ahead of expectations of 55.2.
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"The biggest talking point in markets over the past week or so has clearly been the surprise shift in tone from some of the world's big central banks," said Philip Borkin, senior economist at ANZ Bank New Zealand, in a note. "Now it's probably too aggressive to say this shift has been coordinated, but when it is broader than just the Fed, the message becomes a stronger one, and signals the low interest rate, QE-era, is coming to an end."
Borkin said the question is whether the Reserve Bank of New Zealand and its Australian counterpart "are about to join the fray, and shift more hawkish as well. We suspect the RBNZ and RBA will remain watchful bystanders to this shift in tone for now."
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Traders may get confirmation of that as soon as today with the RBA's rate decision due later today while locally the New Zealand Institute of Economic Research's quarterly survey of business opinion is out today and tonight is the latest Global Dairy Trade auction.
The NZX Dairy Derivatives market expects dairy commodity prices to ease at the July 4 event, with the exception of whole milk powder, which is expected to see a reasonably flat result.
The kiwi was at 95.22 Australian cents from 95.34 cents late yesterday.
It fell to 4.9615 yuan from 4.9642 yuan, rose to 64.21 euro cents from 64.10 cents and edged up to 56.37 British pence from 56.29 pence. The kiwi rose to 82.78 yen from 82.33 yen.