NZ dollar falls as investors shun risk assets

The kiwi dropped to 70 US cents at 8am in Wellington, from 70.27 cents at 5pm yesterday. Photo/: Christine Cornege.

The New Zealand dollar fell as investors shunned higher risk assets amid uncertainty ahead of the Federal Reserve interest rate decision and the British referendum on European Union membership.

The kiwi dropped to 70 US cents at 8am in Wellington, from 70.27 cents at 5pm yesterday. The trade-weighted index edged down to 74.98 from 75.03.

The US dollar index, which measures the greenback against a basket of currencies, advanced as investors shun riskier assets such as the kiwi and the Aussie currencies and turn to assets traditionally deemed to be more secure in times of uncertainty, such as government bonds and the Japanese yen.

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Investors are cautious ahead of the Fed decision on interest rates tomorrow morning and as recent polls show the 'leave' vote in the UK is picking up momentum leading into the June 23 referendum.

"Overnight, an environment of risk aversion prevailed," Bank of New Zealand senior market strategist Kymberly Martin said in a note.

"The US dollar has benefited from the flight from European currencies and 'risk sensitive' currencies such as the Australian dollar and New Zealand dollar."

In New Zealand today, Real Estate Institute house sales data for May is released at 9am, and first quarter current account data is out at 10:45am. Finance Minister Bill English is due to speak at Fieldays in Hamilton at midday.

Tonight, the focus will turn to the latest fortnightly GlobalDairyTrade auction, which BNZ expects may show another slight lift in prices.

The New Zealand dollar advanced to 95.11 Australian cents from 94.96 cents, gained to 62.46 euro cents from 62.26 cents, and edged up to 49.61 British pence from 49.53 pence.

It fell to 74.28 yen from 74.46 yen, and dropped to 4.6151 yuan from 4.6294 yuan