The New Zealand dollar is heading for a 1.3 percent decline this month as tensions in Ukraine eroded investors' appetite for risk-sensitive assets, and in the lead-up to the Federal Reserve's latest policy review, which will likely add support for the greenback.
The kiwi fell to 85.63 US cents at 5pm in Wellington from 86.73 cents at the close of trading in March. It was up from 85.45 cents at 8am and 85.25 cents yesterday. The trade-weighted index increased to 79.68 from 79.33 yesterday, and is heading for a monthly decline of 1.5 percent.
Rising tensions between Western nations and Russia over Ukraine have kept investors on edge this month and the Standard & Poor's 500 Index is largely flat leading into the end of the month. Still, traders will be watching the outcome of the Federal Open Market Committee's policy review on Wednesday in Washington, with the Fed expected to trim a further US$10 billion from its monthly quantitative easing programme to US$45 billion.
The Fed's money printing programme effectively devalued the greenback by flooding supply.
"May is a pretty bad month for the kiwi, but it's not going anywhere fast," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. "It's quite surprising how quiet it is today given it's month-end, US equities are flattish for the month, and with the Fed and US data in the next couple of days."
