The New Zealand dollar fell from its highest levels in more than a week after the Federal Reserve cited "solid" economic activity and a strengthening labour market in its policy review, keeping alive prospects of a rate hike next month.
The kiwi traded fell to 68.83 US cents as at 8am in Wellington, having touched 69.31 cents overnight, from 69.08 cents late yesterday. The trade-weighted index fell to 72.97 from 73.29.
The Fed kept interest rates unchanged as expected while saying that despite hurricane-related disruptions, economic activity "has been rising at a solid rate" with a stronger labour market. Overnight the ADP National Employment Report showed private employers hired 235,000 workers in October, beating estimates, and stoking optimism about Friday's official payrolls data. Among other figures, the US ISM manufacturing index came in just below expectations last month at 58.9.
Overall, the Fed statement "is likely to be seen as providing the all clear for a rate hike next month, although the market was effectively all on board with that view anyway, with a hike around 80 per cent priced ahead of today's statement," said Philip Borkin, senior economist at ANZ Bank New Zealand.
Traders are now awaiting the announcement tomorrow of the replacement for Fed chair Janet Yellen, with Fed Governor Jerome Powell seen as the favourite.
The kiwi dollar gained yesterday after figures showed a lower jobless rate, stronger employment growth and rising wage pressures.
"While we believe the figures overstate local labour market strength, the market will be reluctant to attempt moves lower when arguably a lot of negative news is already priced into the NZD," Borkin said.
Also weighing on the kiwi dollar, the QV house price index posted the lowest rate of annual growth since June 2012 last month, state-owned valuer Quotable Value said. Property value growth slowed to an annual pace of 3.9 per cent in October as inflated Auckland house prices fell for the first time in six years.
Traders locally will be watching for any comments from Fonterra Cooperative Group about the outlook for milk and dairy product prices at its annual meeting in Hawera this morning.
The kiwi slipped to 51.93 British pence from 52.03 pence and fell to 59.21 euro cents from 59.38 cents. It declined to 89.73 Australian cents from 90.10 cents, fell to 4.5434 yuan from 4.5750 yuan and traded at 78.59 yen from 78.64 yen.