The New Zealand dollar jumped against the greenback overnight as investors weigh the imminent prospects of a partial US government shutdown later today should Congress fail to reach agreement on funding.
The kiwi rose to 83.03 US cents at 8am in Wellington, from 82.84 cents at the 5pm market close in Wellington yesterday, making it the strongest performer versus the US dollar among actively traded major currencies, according to Reuters data. The trade-weighted index gained to 77.33 from 77.19 yesterday.
The US dollar broadly weakened overnight as a deadline to avert a US government shutdown approaches. Demand for the greenback has waned amid uncertainty about the likelihood of a US government budget deal being struck by midnight in Washington, or 5pm New Zealand time.
"We saw the US dollar broadly weaken overnight as this debacle with the US government on their closedown looms, what this meant is we saw the kiwi and the Aussie dollar creep higher," said Stuart Ive, senior client advisor, foreign exchange and derivatives at OM Financial. "We are going to hover here until we find out what is actually going on with the US government."
Demand for the kiwi is underpinned by a buoyant local economy, Ive said.
The New Zealand dollar edged up to 89 Australian cents from 88.94 cents yesterday. The Reserve Bank of Australia is expected to keep interest rates unchanged at its meeting today although traders will be watching the commentary for signals of future movements.
The local currency rose to 81.51 yen from 81.13 yen yesterday. In Japan today, traders will be eyeing the third quarter Tankan business confidence survey with a strong result expected to prompt Prime Minister Shinzo Abe to hike the VAT consumption tax. A higher tax could weaken the yen as investors anticipate it will require the Bank of Japan to ease later this year, Mike Jones, currency strategist at Bank of New Zealand, said in a note.
Traders will also be eyeing a report about 2pm today on Chinese manufacturing for indications of how Asia's largest economy is tracking.
The kiwi was little changed at 61.37 euro cents from 61.34 cents yesterday and at 51.28 British pence from 51.23 pence.