The New Zealand dollar is heading for a 1.6 per cent weekly decline against the greenback amid uncertainty about when the Federal Reserve will resume hiking interest rates in the world's biggest economy.

The local dollar fell to 67.78 US cents at 5pm in Wellington from 68.89 cents last week, when the kiwi jumped to a nine-month high. It traded at 67.78 cents at 8am, down from 68.24 cents yesterday.

The trade-weighted index fell to 71.81 from 72.22 yesterday and is heading for a 1.5 percent weekly decline.

A BusinessDesk survey of 12 analysts predicted the local currency would trade between 67.20 US cents and 71 cents this week. Five expected the kiwi to gain, five bet it would decline and two said it will stay largely unchanged.


Traders have been contending with mixed messages from the Fed, with some officials more upbeat in their assessment of the US economy, which would lead to higher interest rates, while chair Janet Yellen was more circumspect in her outlook, tempering optimism on the timing and pace of hikes.

Federal Open Market Committee member and New York Fed president William Dudley is due to speak on the economy.

"There seems to be some pretty strange signals from some of those Fed presidents over the last couple of weeks," said Mark Johnson, senior dealer foreign exchange at OMF in Wellington.

"The Fed has a pretty clear message expecting a couple of rate hikes this year, but the issue for the market is they don't know when to price those things in."

Johnson said the kiwi will continue to trade in a tight range against the greenback with investors looking overseas for direction.

The kiwi fell to a seven-month low against the yen on speculation the Bank of Japan won't intervene to halt a rally in the Japanese currency ahead of a Group of Seven nations meeting next month.

Like other central banks, the Bank of Japan has flooded the market with money, buying bonds and other assets in a bid to spur inflation in the world's third biggest economy. The local currency dropped to 73.72 yen from 74.43 yesterday.

New Zealand's Reserve Bank hasn't needed to embark on extraordinary monetary policy like other nations, though the official cash rate has been cut to a record-low 2.25 percent, and the central bank today said in a note that it had had some success in keeping short-term rates near the benchmark after taking a more active role in money markets, which had experienced reduced liquidity.

New Zealand's two-year swap rate slipped one basis point to 2.17 per cent, and 10-year swaps declined two basis points to 2.91 percent.

The kiwi increased to 89.87 Australian cents from 89.64 cents yesterday, and dropped to 4.3907 Chinese yuan from 4.4151 yuan. It decreased to 59.64 euro cents from 59.82 cents yesterday, and was little changed at 48.15 British pence from 48.31 pence.