The New Zealand dollar advanced as concern US politicians have yet to reach agreement before this week's deadline for raising the nation's debt limit, risking default, weighed on the greenback.
The kiwi rose to 83.67 US cents at 8am in Wellington from 83.31 cents at the 5pm market close yesterday. The trade-weighted index gained to 77.64 from 77.34 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, declined as the political gridlock continues. US politicians have been unable to agree on the budget with a partial government shutdown now entering its third week, and with Thursday's deadline looming for the debt ceiling to be lifted.
"The closer we get to the doomsday time, the more nervous markets are becoming and the greater pressure is on the US when there is no clear solution," said Peter Cavanaugh, client advisor at Bancorp Treasury. "If anything, there seem to be more talks. The good news is they are closer than they were a week ago, the bad news is they are still a long way apart.
"If the US does hit the debt ceiling and the worst case scenario is realised you could see a substantially weaker US dollar which could push the New Zealand dollar a lot higher."