The New Zealand dollar fell as Federal Reserve officials talked up the prospect of an interest rate hike this year which would sap the kiwi's relative interest rate advantage, and ahead of a speech by Reserve Bank governor Graeme Wheeler.
The kiwi declined to 72.16 US cents at 5pm in Wellington from 72.42 cents at 8am and 72.68 cents on Friday in New York. The trade-weighted index dropped to 76.64 from 77.05.
The US dollar index extended its gain during the Asian trading session as investors latched on to comments by San Francisco Federal Reserve President John Williams, a non-voting Fed member, who said that the US economy had "good momentum" and it made sense to return to gradual increases, "preferably sooner rather than later." New Zealand's currency has been bolstered by an extended period of near-zero US interest rates, and a hike by the Fed would do some of the RBNZ's work for it.
Fed chair Janet Yellen is scheduled to talk at the Jackson Hole symposium next weekend, where she may give a clearer steer on the timing of rate hikes.
"People will look to the Fed to do the heavy lifting and if that's the case, it takes the pressure off the RBA and RBNZ," said Mark Johnson, senior dealer foreign exchange at OMF in Wellington. "The kiwi's looked heavy all day, it's just a question of how far can this kiwi go before it runs into support."
RBNZ's governor Wheeler will deliver a public speech in Dunedin tomorrow titled 'Monetary policy challenges in turbulent times'. Wheeler cut the official cash rate a quarter point to 2 percent this month and indicated more easing was in the pipeline as he tries to prevent dwindling inflation expectations from bedding in.
New Zealand's two-year swap rate rose 3 basis points to 1.99 percent and 10-year swaps increased 5 basis points to 2.46 percent.
The local currency rose to 95 Australian cents from 94.56 cents on Friday in New York. It slipped to 4.8072 yuan from 4.8336 yuan and fell to 63.96 euro cents from 64.18 cents. The local currency declined to 55.31 British pence from 55.58 pence and was little changed at 72.72 yen from 72.77 yen.