Global uncertainty prevailed after the US House of Representatives on Thursday night passed a bill that included US$5.7 billion ($8.4b) in funding for the US-Mexico border wall.
According to Reuters, the Senate is highly unlikely to pass the legislation, which funds agencies responsible for federal law enforcement activities, airport security screenings, space exploration and farm programmes, by a midnight deadline on Friday.
"Were we to see a situation where that bill does not get up, I think it would add to the uncertainty as we finish off this year and the risks as we go into 2019," said Robert Rennie, chief currency strategist at Westpac Banking Corp in Sydney.
"I am not sure that is something that would be particularly good for the likes of the kiwi," he added.
Markets were further spooked by news US Defense Secretary Jim Mattis had resigned after President Donald Trump proposed withdrawing troops from Syria.
Rennie noted that the yen has benefited from the rising risk aversion, particularly in the past 24 hours. The US dollar would usually benefit but if the issues are around a potential US government shutdown, US-China spying, US-China trade tensions "then it's not so attractive in that situation," he said.
Uncertainty had also been heightened after news US prosecutors had indicted two Chinese nationals linked to a spy agency on charges of stealing confidential data.
The kiwi rose to 95.21 Australian cents from 94.85 cents yesterday and traded at 53.51 British pence from 53.38 pence yesterday. It was at 59.15 euro cents from 59.21 cents. The trade-weighted index was at 74.00 from 73.83 yesterday.
New Zealand's two-year swap rate was unchanged at 1.97 per cent; the 10-year swaps rose 1 basis point to 2.66 per cent.
