The New Zealand dollar is headed for a 2.2 per cent weekly gain against the greenback, boosted by strong domestic growth data and a lift in global risk appetite.
The kiwi traded at 66.93 US cents at 5pm in Wellington versus 66.85 US cents at 9am in Wellington and 66.44 cents yesterday. It was at 65.46 last Friday in New York. The trade-weighted index was at 72.29 from 71.98 yesterday.
The New Zealand dollar lifted after US and Chinese tariffs on each other's goods were set at lower rates this week than previously expected and after reports that Beijing might cut tariffs on imports from other countries.
The main driver, however, was Thursday's news that the economy expanded more than expected in the second quarter, slashing expectations that the Reserve Bank of New Zealand might have to cut rates.
"It was good data.. the market was too bullish on US dollars and this is a bit of a correction," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.
All 19 economists polled by Bloomberg expect the RBNZ to keep rates on hold at a record low 1.75 per cent next Thursday and while a rate cut may be off the table, most expect it to continue to reiterate that the next move could be down or up, despite the strong GDP data.
"We expect that the RBNZ will retain a consistent message, with OCR cuts remaining on the table should the economic data disappoint, but eventual hikes their base case," said ANZ Bank.
Kelleher said next week's Federal Open Market Committee meeting will also be in focus. There will be particular interest in FOMC projections for growth, inflation and the target interest rate for 2021.
The kiwi strengthened to 91.74 Australian cents from 91.53 cents and rose to 75.42 yen from 74.53 yen yesterday. It traded at 50.40 British pence from 50.52 pence and weakened to 56.80 euro cents from 56.88 cents yesterday. It advanced to 4.5766 yuan from 4.5523 yuan.
New Zealand's two-year swap rate rose 1 basis point to 2.03 per cent while 10-year swaps fell 1 basis point to 2.92 per cent.