The New Zealand dollar is heading for a 1.3 per cent gain this week as demand for the greenback waned after the US Federal Reserve scaled back planned rate hikes because of weakening prospects for the global economy.

The kiwi rose to US68.39c at 5pm yesterday from US67.50c a week ago in New York. It traded at US68.57c at 8am yesterday, up from US67.70c on Thursday. The trade-weighted index rose to 72.29 from 71.98 last week, and is heading for a 1.1 per cent weekly gain.

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A BusinessDesk survey of 12 currency advisers on Monday predicted the kiwi would trade between US65c and US69c this week, with six picking it to fall, one projecting a gain, and five expecting it to be little changed.


The US dollar index, a measure of the greenback against a basket of currencies, dropped to a five-month low as traders scaled back their holdings in the world's reserve currency after the Fed this week lowered its projected rate hikes to two from a previous four.

"The US data is telling us it's the Fed that has been spooked and not the US economy," said Sam Tuck, senior foreign exchange strategist at ANZ Bank in Auckland. The US68.50/US69c area where the kiwi is trading "is quite an important level" and if it breaks higher, the currency "can go above 70".

Consumer confidence softened in March while remaining upbeat as New Zealanders retained confidence in the economy. Data on Thursday showed New Zealand's gross domestic product grew a stronger-than-expected 0.9 per cent in the December quarter.

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New Zealand's two-year swap rate fell two basis points to 2.22 per cent at 5pm yesterday, and 10-year swaps declined three basis points to 3.01 per cent.

The kiwi climbed to A89.31c cents A88.96c on Thursday and advanced to 4.4204 Chinese yuan from 4.3991 yuan. It was little changed at 60.39 euro cents from 60.32 cents on Thursday and fell to 47.28 British pence from 47.48 pence. The kiwi edged down to 76.05 yen from 76.14 yen on Thursday.