The New Zealand dollar fell as increasing confidence about the pace of the US economy drove up the greenback and traders continued to weigh the implications for the local economy of weaker dairy prices.
The kiwi fell to 77.55 US cents as at 8am in Wellington, from 77.71 US cents late yesterday. The trade-weighted index was little changed at 78.10 from 78.13.
The US Federal Reserve's Beige Book reported "widespread" gains in employment, rising consumer spending and a pickup in manufacturing in most regions. It followed the release of the ADP Research Institute's private payrolls report, which showed the economy added 208,000 jobs last month, less than expected but still a robust pace. The official non-farm payrolls data is released on Friday. The US Dollar Index, which measures the greenback against a basket of currencies, is at its highest since early 2009.
"The Beige Book continues the theme that the US remains on track," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand. "That story is the driving theme in the market and the US dollar has gained on that."
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The kiwi dollar is trading at its lowest levels in almost a month, having weakened this week after dairy product prices fell to a five-year low in the latest GlobalDairyTrade auction, led by a drop in whole milk powder.
"The New Zealand dollar is distinctly under pressure with that commodity story," Tuck said.
Ahead of US non-farm payrolls on Friday, financial markets are awaiting the European Central Bank's review of monetary policy tonight amid speculation it is closer to announcing an escalated policy of quantitative easing to revive the region's moribund economy.
"Everybody is talking about the ECB - it is the only game in town for the markets today," Tuck said. While there was a risk the ECB would announce plans to start buying bonds, ANZ Bank's house view was that it probably wouldn't make such a move until its January or March meetings, he said.
The local currency rose to 63 euro cents from 62.72 cents and fell to 49.43 British pence from 49.66 pence. It gained to 92.90 yen from 92.73 yen and fell to 92.21 Australian cents from 92.56 cents.