The New Zealand dollar fell against a broadly stronger US dollar as commodity prices fell, US consumer confidence rose and Japan signalled its willingness to tackle gains in the yen.
The kiwi fell to 72.15 US cents as at 8am in Wellington from 72.47 cents late yesterday. The trade-weighted index eased to 77.10 from 77.18.
The US dollar index has climbed about 1.5 percent since Friday in the US, when Federal Reserve chairwoman Janet Yellen and vice chairman Stanley Fischer talked up the prospects of interest rate hikes this year. Sentiment for the greenback was helped overnight by figures showing US consumer confidence rose more than expected this month to the highest since September last year, while currencies tied to raw materials, such as the kiwi, retreated as CRB Index of commonly traded commodities fell to a two-week low.
"The US dollar is stronger across the board, as investors have one eye on a possible rate hike later in the year," said Jason Wong, currency strategist at Bank of New Zealand, in a note. "The market is gradually losing interest in pricing in the chance of a (US) hike as soon as September" and a hike in December is expected, he said.
The odds of a US hike in September are just 34 percent while December's chances are rated by the market at 69 percent, he said. Meanwhile, just 3.5 basis points of easing are priced in for the Reserve Bank's Sept. 22 official cash rate review.
The greenback extended its gains against the yen after comments that Japan will act to drive down its currency if needed. Japan's chief cabinet secretary, Yoshihide Suga, signaled Tokyo's readiness to intervene in the market if the yen spikes out of line with fundamentals and defended the Bank of Japan's negative interest rate policy, Reuters reported.
The kiwi rose to 74.28 yen from 74 yen late yesterday. The local currency rose to 96.05 Australian cents from 95.71 cents, breaking above 96 cents for only the second time since mid-July.
Wong said the ANZ Business Outlook for August, due out today, is likely to be the main piece of important data for the market but the main event this week is still non-farm payrolls data due out in the US on Friday, which are expected to show the world's largest economy added 180,000 jobs in August.
The kiwi fell to 4.8180 yuan from 4.8373 yuan, was little changed at 64.73 euro cents from 64.89 cents and fell to 55.16 British pence from 55.40 pence.