The New Zealand dollar fell to the lowest in more than six months after the greenback soared on expectations the Federal Reserve will start hiking interest rates earlier and faster than previously anticipated.
The kiwi fell to 82.54 US cents at 5pm in Wellington from 82.77 cents at 8am and 83.16 cents yesterday. The trade-weighted index declined to 78.91 from 79.02 yesterday.
The Dollar Index, a measure of the greenback against a basket of currencies, rose as high as 84.50, the highest since July last year, as optimism about the strength of the world's biggest economy fuels expectations the Fed will move away from running a zero interest rate policy. The Federal Open Market Committee will review policy next week.
"The US dollar is stronger across the board - every market is pre-empting the Fed," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. "There's a cluster of support at around 81.80/82.40 (US cents) - that's the target."
Traders are also preparing for the Reserve Bank of New Zealand's monetary policy statement on Thursday, which may show a slower track for interest rate hikes as inflation comes in tamer than the central bank expected. The prospect of a longer pause in the tightening cycle has put the local currency under pressure.
