The New Zealand dollar fell to a two-week low after minutes of the Federal Reserve's last meeting signalled the central bank may start tapering its bond buying programme next month, a move that would strengthen the greenback.
The kiwi fell as low as 78.44 US cents, and was trading at 78.47 cents at 8am in Wellington, from 79.87 cents at the 5pm market close yesterday. The trade-weighted index slipped to 74.01 from 74.64 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, advanced after the Fed minutes showed there was broad support for chairman Ben Bernanke's plan to pull back on stimulus even as some officials felt patience was required on the timing. Most investors are betting the tapering of the Fed's US$85 billion a month bond buying programme could start as early as next month.
"The Fed is in general consensus that they do need to start tapering soon although we still don't know the exact date," said Stuart Ive, senior client advisor foreign exchange and derivatives at OM Financial. "It means the US dollar will start strengthening and hence why the kiwi continues to weaken and that is what we have seen overnight. We have still got plenty of room to move to the downside."
The New Zealand dollar is seeing initial support at 78.40 US cents, although it could slide as far as 77 cents in the next few weeks should US economic data continue to improve, said OM Financial's Ive.
