The New Zealand dollar fell to a five-month low as the greenback broadly rose on speculation the Federal Reserve is closer to raising interest rates and sentiment for the kiwi was dented by weaker dairy prices and what may be a prolonged pause in hikes to the official cash rate.
The local dollar fell to 83.91 US cents, breaking below a key support level of 84 cents for the first time since early March, and down from 84.47 cents yesterday. The trade-weighted index slipped to 78.95 from 79.21 yesterday.
The US Dollar Index, which measures the greenback against a basket of currencies, has gained to its highest level in 11 months on speculation the Federal Reserve will raise interest rates as the US economy revives and the bank comes to the end of its bond purchasing programme. Minutes to the Federal Open Market Committee's August meeting are due for release on Wednesday in Washington.
The kiwi dollar, favoured for its relatively high yield, has faltered after the Reserve Bank signalled it may hold off raising rates again amid signs the New Zealand economy isn't robust enough to stoke inflation and prices of dairy products, the nation's biggest export commodity, continued to slide.
"The US dollar is bid right across the board," said Sue Trinh, senior currency strategist at RBC Capital Markets. "The kiwi has under-performed on most of the crosses as well, but sentiment is much worse on the back of the continued decline in dairy prices" and speculation interest rates "are on hold for the rest of the year," she said.
