NZD/USD holds near 0.7000 as US dollar stays soft

NZD/USD is starting out in early Asia flat at 0.6969 and has ranged between a low of 0.6952 and 0.6993.

The US July manufacturing ISM dipped to 59.5 (exp: 61.0, prev: 60.6).  

Rates markets were more responsive to the disappointing US data, with the US 10-year yield dropping 4.2bps, touching its lowest level since February.

This weighed on the greenback.

The dollar index, DXY, which measures the greenback against six major peers, was off 0.19% at 91.912 the lows but it has since recovered to a flat positing on the day, touching a high of 92.171.

The moves today reflect a softness from last week's 0.88% drop. This was the greenback's worst week since early May, as it turned away from a 3-1/2-month high a week before when traders were positioning for a speedy start of Fed tapering.

Overall, the market has speculated that the Fed is in no hurry to raise interest rates which is a green light for risk-on, denting the appeal of the greenback. 

The sentiment follows Fed Chair Jerome Powell who said last week that considerations of higher interest rates were "a ways away'' in presser which followed a hawkish turn in the statement with regards to timings of a taper.

''Wavering US equities and lower bond yields have weighed on risk sentiment and the NZD, painting a picture of caution that perhaps things aren’t as joyous as what has been portrayed by a couple of quarters of uber-enthusiasm that have gripped markets,'' analysts at ANZ Bank said. 

''The Kiwi is unlikely to move far on domestic news ahead of key local labour market data tomorrow (but it could on global news). Strong data wouldn’t surprise anyone given anecdotes, but that, of course, begs the question: how much positivity is already priced in?'' the analysts added.