The New Zealand dollar is heading for a 1.5 per cent weekly decline against the greenback, reflecting the Reserve Bank's signal that it needs to cut interest rates to drive down the currency and stoke inflation.

The kiwi traded at US70.03c at 5pm yesterday from US69.88c late on Thursday and down from US71.09c a week ago. The trade-weighted index was at 75.06, little changed from 74.97 on Thursday and down from 76.01 a week ago.

Traders are pricing in an 89.6 per cent chance that governor Graeme Wheeler will cut the official cash rate to 2 per cent with the monetary policy statement on August 11.

The US Federal Reserve may be the wild card in the short term, with the Federal Open Market Committee due to meet next week and some members keen to see an increase in US interest rates this year.


"The impact of an RBNZ interest rate cut is largely priced in," said Chris Weston, chief market strategist at IG Markets. "For me, it's a done deal. Why would it leave rates on hold, given everything it's said? The RBNZ has a great history of doing what it says it'll do."

Weston said there's a "good chance" the RBNZ will cut again on November 10, the next MPS following the review in August.

Economists expect the Fed will keep its key rate unchanged within the range of 0.25 per cent to 0.5 per cent. But Weston said a number of committee members "are pushing hard for it to raise rates this year".

The Fed is likely to signal it is keeping all options open and although Weston says he thinks the US central bank should keep rates low for a long period of time, signs of stability in economic data and minimal impact from Brexit could see the greenback rally in expectation of rate increases, he said.

The kiwi dropped to 74.10 yen from 74.84 on Thursday, when Bank of Japan governor Haruhiko Kuroda ruled out "helicopter money" - where a central bank buys perpetual bonds with no maturity date - as a means to stir inflation.

The kiwi traded at 52.97 British pence, up from 52.80 pence on Thursday. It rose to A93.64c from A93.30c on Thursday and to 4.6749 Chinese yuan from 4.6620 yuan.