The New Zealand dollar is heading for a 1.3 percent fall on a trade-weighted basis this week after the Reserve Bank kept interest rates on hold and the Federal Reserve trimmed another US$10 billion from its bond buying programme.
The trade-weighted index fell to a month-low, trading at 77.26 at 5pm in Wellington from 78.31 at the close of trading last week, and was down from 77.44 yesterday. The kiwi traded at 81.51 US cents at 5pm from 81.41 cents at 8am, down from 81.78 cents yesterday. It's heading for a 0.7 percent weekly fall from 82.11 cents at the close of trading last week.
A BusinessDesk survey of six traders and strategists on Monday predicted the local currency would trade between 80.80 US cents and 84.20 cents this week. Four predicted the kiwi would fall this week, while two expected it to remain largely unchanged.
Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.5 percent on Thursday, while saying he would hike rates soon in response to building inflationary pressures. In a speech to a Canterbury business audience today, Wheeler flagged inflation as an important risk to local economic growth, with accelerating building activity threatening to drive up broader consumer prices.
"The fact remains we will see interest rate hikes this year - that's a given," said Dan Bell, head of corporate sales at HiFX in Auckland. "We're going to be one of the only central banks in the developed world raising interest rates, and that should continue to provide support for the New Zealand dollar."
