The New Zealand dollar fell as investors bet expectations for the Federal Reserve to delay tapering its monetary stimulus programme until March next year had already been priced into the markets.
The kiwi slipped to 82.49 US cents at 8am in Wellington, from 82.64 cents at the 5pm market close yesterday. The trade-weighted index was little changed at 76.25 from 76.20 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, rose as investors bet markets had priced in a delay to tapering following a government shutdown this month. The Federal Reserve Open Market Committee is expected to announce tomorrow that it will continue its US$85 billion a month bond buying programme, which has weighed on the greenback.
The kiwi "felt the pinch of a broad-based rally in the greenback overnight, as investors lighten US dollar short positions ahead of tomorrow morning's US FOMC meeting," Mike Jones, currency strategist at Bank of New Zealand, said in a note. "Markets are now in a holding pattern ahead of the Fed decision."
Investors who buy a short trade are anticipating that a currency will decline in value. The Fed committee will announce its decision at 7am New Zealand time tomorrow following a two-day meeting.