The New Zealand dollar fell as more Federal Reserve officials suggested the US central bank should be hiking interest rates, contrasting with its decision last week to keep rates on hold.
The kiwi dropped to 67.07 US cents at 8am in Wellington, from 67.35 cents at 5pm yesterday. The trade-weighted index edged up to 71.54 from 71.49 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, advanced as the flow of Federal Reserve officials speaking this week continued to suggest they favour more rate hikes, despite the bank keeping rates on hold last week and pulling back its projected hikes this year to two from four.
The latest dissenters include Philadelphia Fed president Patrick Harker, who said the central bank should consider another hike as early as next month if the US economy continues to improve, and that he favours at least three hikes this year. The comments, along with weaker commodity prices, buoyed the greenback and weakened the kiwi.
"Fed speakers over the last 24 hours have presented a more optimistic picture than that which the market formed from the Fed conference, encouraging markets to return to the US dollar," ANZ Bank New Zealand senior economist Sharon Zollner and senior foreign exchange strategist Sam Tuck said in a note. "This sentiment was aided by a mild risk-off tone overnight, with 'risk' currencies such as AUD and NZD following commodities, equities and yields lower."
ANZ expects the kiwi to trade between 66.60 US cents and 67.80 cents today.
In New Zealand today, trade data for February released at 10:45am is expected to show the country's monthly trade surplus increased to $50 million from $8 million, according to a Reuters poll of economists. New Zealand markets are closed Friday and Monday for the Easter public holiday.
The New Zealand dollar gained to 89.10 Australian cents from 88.30 cents yesterday, and edged up to 47.51 British pence from 47.42 pence. It slipped to 59.97 euro cents from 60.06 cents, declined to 75.34 yen from 75.65 yen, and weakened to 4.3625 yuan from 4.3714 yuan.