The New Zealand dollar is headed for a 1.3 per cent weekly gain after the greenback took a tumble as investors pared back expectations for rate hikes by the US Federal Reserve.

The kiwi traded at 68.65 US cents at 5pm in Wellington versus 68.44 at 8am and 67.79 US cents last Friday in New York. The trade-weighted index was at 74.78 versus 74.66 late yesterday.

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The bulk of the lift came mid-week when Federal Reserve Chairman Jerome Powell gave a speech saying that US interest rates "remain just below the broad range of estimates of the level that would be neutral for the economy - that is, neither speeding up nor slowing down growth."

That led investors to rethink the number of rate hikes the Fed may be planning next year, which weighed on the US dollar.

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Ongoing weakness in New Zealand business confidence this week failed to dent the mood and Westpac Bank analysts said there is potential for the kiwi to move higher as some investors pare back short positions - where they had been betting the New Zealand dollar would fall further.

"NZD/USD continues its strong run, in part due to a string of NZ data surprises plus crowded speculative shorts which are now being exited. A break above 68.90 US cents then targets 71.60, the June high," they said in a weekly report.

Markets are now closely focused on US President Donald Trump's meeting with his Chinese counterpart Xi Jinping on the sidelines of the G20 meeting in Buenos Aires this weekend. The trade tensions have weighed on sentiment as investors fret about the impact on global growth.

While a positive outcome would give risk appetite a lift, Andrew Kenningham, chief global economists for Capital Economics warns the most that can reasonably be hoped for is an agreement which "temporarily reduces US-China tensions."

Longer term, it is highly unlikely that any agreement will mark the start of a complete retreat from the trade war, he said. "For a start, there seems to be little reason for the US to back away from the conflict at this stage."

The kiwi traded at 93.80 Australian cents from 93.77 cents yesterday and Westpac Bank said it has a tentative top at 94.45. "But we really need to see 93.50 give way to have confidence in that. If confirmed, we'd be looking at 92.50 as a near-term target."

It was at 77.84 yen from 77.69 yen and was at 4.7659 Chinese yuan from 4.7578 yuan yesterday. It rose to 53.71 British pence from 53.38 pence and traded at 60.24 euro cents from 60.22 cents.

New Zealand's two-year swap rate fell 1 basis point to 2.08 per cent; the 10-year swaps were were down 1 basis point at 2.89 per cent.