The New Zealand dollar is heading for a 0.5 per cent weekly decline, having tumbled yesterday after a "dovish" Reserve Bank statement, and traders say the kiwi could extend its decline if it ends the week below a key support level.
The kiwi traded at US68.41c at 5pm today from US68.34c late yesterday and down from US68.59c a week ago. The trade-weighted index was at 74.70 from 74.74 yesterday, below the RBNZ's latest projected average for the TWI in the June quarter of 76.
The kiwi has failed to sustainably push below US68.50c in the past few weeks but is trading near its lowest levels in almost 12 months. If it ends the week below that level, it could head down to US67c, traders said today, and if it closes above, it will have kept broadly within its recent trading range.
Reserve Bank governor Graeme Wheeler surprised the market by keeping the track for the official cash rate unchanged instead of bringing forward the timing of a rate hike.
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"That was a very dovish statement so the market had to take notice of it," said Alex Hill, head of dealing Australasia at HiFX.
"But the market will really make its mind up with the next set of inflationary economic data."
The central bank "poured water" on the idea that interest rates are set to rise but the kiwi "hasn't fallen down the elevator shaft" as a result, Hill said. "The big picture hasn't changed a lot."
"Right now, it seems quite clear that the RBNZ has far more confidence to deal with an inflation overshoot than the opposite, especially at a time when policy is already being tightened through the banking sector," ANZ Bank New Zealand economist Phil Borkin said in a note.
The kiwi didn't move much after figures showed manufacturing activity dipped in April or when Real Estate Institute data showed a drop in the national median house price and fewer property sales.
The kiwi rose to 53.06 British pence from 52.81p yesterday. The local currency traded at 62.93 euro cents from 62.86 euro cents and fell to 77.75 yen from 78.02 yen. It fell to A92.65c from A93.02c and increased to 4.7203 Chinese yuan from 4.7167 yuan. Two-year swap rates fell 5 basis points to 2.21 per cent and 10-year swaps declined 7 basis points to 3.31 per cent.