NZ dollar above 66 US cents as US September rate hike hopes fade

The New Zealand dollar has fallen 15% against the greenback so far this year, reflecting weaker economic growth, falling dairy prices, lower interest rates and a pick up in the US. Photo / NZME.

The New Zealand dollar jumped higher after the minutes of the Federal Reserve's last meeting pushed out expectations for a US interest rate hike, damping demand for the greenback.

The kiwi rose to 66.08 US cents at 8am in Wellington, from 65.79 cents at 5pm yesterday.

The trade-weighted index increased to 71.06 from 70.95 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, dropped after the release of the minutes, which cited concerns about weak wage inflation and oil prices.

Futures show traders pared back their expectations the Fed will raise rates at its September meeting to about a 38 percent chance, down from about 50 per cent earlier in the day, according to Bloomberg.

"There was no smoking gun for a September lift off in those minutes," said Bank of New Zealand currency strategist Raiko Shareef.

"Those factors are now biasing the Fed to delay rather than raise at our forecast of September. We will stick with September for now, but certainly the risks have shifted towards a later start."

With a lack of local data, the kiwi was likely to raise as traders would probably continue to unwind their 'short' positions, which were fixed when it had appeared more likely the kiwi would fall, Shareef said.

However, investors are likely to sell the kiwi heading into 67 US cents, given the US dollar is expected to move higher over the medium term.

In New Zealand today, the ANZ-Roy Morgan consumer confidence survey is scheduled for release at 1pm.

The New Zealand dollar advanced to 89.82 Australian cents from 89.75 cents yesterday, increased to 42.11 British pence from 41.98 pence, slipped to 59.37 euro cents from 59.54 cents, edged lower to 81.76 yen from 81.80 yen, and gained to 4.2262 yuan from 4.2096 yuan.