The New Zealand dollar fell as Reserve Bank governor Graeme Wheeler's message that the currency needs to depreciate combined with a more optimistic United States labour market view from the Federal Reserve weighed on the local currency.
The kiwi declined to US66.39c at 5pm yesterday from US66.62c at 8am and US66.98c on Wednesday. The trade-weighted index dropped to 70.74 from 71.31.
The local currency continued its decline from Wednesday after Wheeler said the kiwi was too high given the deteriorating outlook for New Zealand's external accounts, with slumping milk prices weighing on the nation's biggest exported commodity.
At the same time, the greenback got a boost from a favourable assessment of the American labour market by the Federal Open Market Committee, though traders are still unsure whether the Fed will hike interest rates at the September meeting.
AdvertisementAdvertise with NZME.
"The market came to terms with the glass half-full speech and continuing underlying message on the currency calling that further depreciation is necessary and fundamental factors will drive it," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland.
"The kiwi's been under pressure all day."
Fonterra Co-operative Group yesterday announced it would reduce supply at next week's GlobalDairyTrade auction, which has been keenly watched as falling dairy prices weigh on New Zealand's terms of trade.
The first reading for second-quarter United States gross domestic product will also be watched by traders, with the recovery in the world's largest economy expected to keep supporting the greenback.
New Zealand government data yesterday showed a slowdown in new building consents in July as rising construction intentions in Auckland failed to offset declines in Canterbury, where earthquake reconstruction effort has peaked.
The local currency sank to A90.66c at 5pm from A91.53c on Wednesday, and dropped to 4.1219 Chinese yuan from 4.1585 yuan. It decreased to €60.46c from €60.58c on Wednesday and fell to 42.54p from 42.92p. The kiwi declined to €82.36 from €82.68 on Wednesday.
New Zealand's two-year swap rate edged up to 2.91 per cent from 2.9 per cent, and the 10-year swap gained to 3.73 per cent from 3.66 per cent. BusinessDesk