The New Zealand dollar touched a fresh five-year low as the greenback strengthened on optimism the Federal Reserve may raise interest rates as early as September.
The kiwi touched 68.13 US cents, its lowest level since July 2010, and was trading at 68.46 US cents at 8am in Wellington, from 68.50 cents at 5pm yesterday. The trade-weighted index was little changed at 71.48 from 71.47 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, advanced after upbeat economic data on housing pointed to a revival in the world's largest economy. Comments overnight by Federal Reserve governor Jerome Powell that the US economy could be ready for two interest rate increases this year, in September and December, further bolstered investor confidence about the outlook and stoked demand for the greenback.
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"The US dollar found broad strength," ANZ Bank New Zealand senior economist Sharon Zollner and senior FX strategist Sam Tuck said in a note. "US dollar strength was later extended following comments from Fed Governor Powell that he is forecasting the Fed to hike interest rates twice this year. However, he acknowledged that the outlook remained uncertain and the probability that the Fed commences tightening in September was '50-50'."
