The New Zealand dollar jumped above 69 US cents overnight, its highest level since June last year, as the US dollar continued to weaken on growing expectations the Federal Reserve won't raise interest rates as fast as previously forecast.
The kiwi touched 69.64 US cents and was trading at 69.34 cents at 8am in Wellington, from 68.45 cents at 5pm yesterday. The trade-weighted index rose to 73.21 from 72.56 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, declined after Chicago Fed president Charles Evans argued for a "very shallow" series of interest rate hikes in the US over the next few years, reiterating the tone of Fed chair Janet Yellen who this week urged "caution" on further hikes.
That comes after the Fed this month pulled back its projection for this year to two hikes from four, denting demand for the US dollar and pushing up the value of other currencies such as the kiwi.
"The New Zealand dollar has rocketed overnight," said Tim Kelleher, ASB Bank head of institutional foreign exchange sales in New Zealand. He attributed the gain to US dollar pressure "across the board".
The higher kiwi "puts a greater deal of pressure on the Reserve Bank to cut in April rather than June," Kelleher said, although he noted the next meeting on April 28 is an official cash rate announcement, limited to a one-page statement, rather than a Monetary Policy Statement which involves a press conference and gives the bank more of an opportunity to explain its views.
The kiwi is likely to maintain a stronger bias, with a base of around 69 US cents, ahead of the key US non-farm payrolls report tomorrow, and as investment fund portfolio managers increase their allocations for the currency as they adjust their accounts at the end of the month, he said.
ASB increased its forecast for the kiwi, and now expects it to reach 71 US cents by the end of the year, from a previous forecast of 65 cents. It expects it to trade at 73 US cents by the middle of next year, from a previous forecast of 67 cents.
In New Zealand today, the ANZ business confidence survey is scheduled for release at 1pm.
The New Zealand dollar rose to 90.32 Australian cents from 89.76 cents yesterday, increased to 61.14 euro cents from 60.62 cents, gained to 48.18 British pence from 47.61 pence, advanced to 77.94 yen from 76.99 yen and edged up to 4.4808 yuan from 4.4390 yuan.