The New Zealand dollar fell to its lowest in more than three weeks overnight as investors took profits on the expectation the local currency may not advance further.
The kiwi touched 85.19 US cents early this morning and was trading at 85.28 cents at 8am in Wellington from 85.75 cents at 5pm yesterday. The trade-weighted index slipped to 79.42 from 79.78 yesterday.
Demand for the nation's currency pushed the kiwi to a two-and-a-half year high of 87.44 US cents on April 10, however the kiwi has been in decline since then on the expectation higher interest rates are already priced in to its value and it may not appreciate further. The Reserve Bank has raised the benchmark rate two times in as many months and is expected to continue hiking to curb inflation.
"Everything is priced in for the kiwi in terms of these rate rises and when you are at elevated levels, you have only one place to go," said Stuart Ive, senior advisor at OMF. "People are quite happy to sell the kiwi at elevated levels that we are seeing currently and it does appear that it is beginning to struggle a little bit."
Escalating tensions in the Ukraine and an expected continuation of tapering at this week's Federal Reserve meeting are also weighing on the kiwi, Ive said.
