NZ dollar slips as US dollar strengthens on optimism about US rate hike

The New Zealand dollar has fallen 15% against the greenback so far this year, reflecting weaker economic growth, falling dairy prices, lower interest rates and a pick up in the US. Photo / NZME.

The New Zealand dollar slipped as the US dollar strengthened after Federal Reserve officials signalled the US central bank is on track for a potential rate hike next month.

The kiwi was at 64.65 US cents at 8am in Wellington, from 64.53 cents at the New York close and 64.73 cents at 5pm last Friday.

The trade-weighted index was at 70.09 from 69.98 on Friday.

The US dollar index, which measures the greenback against a basket of currencies, touched its highest level in eight days after Fed vice chair Stanley Fischer told a central bankers conference at Jackson Hole, Wyoming, at the weekend that the Fed remained on track for lift-off this year and that the "door remains open" to a September hike.

The comments add to those from Fed Atlanta president Dennis Lockhart that the odds of a rate hike in September are roughly even, and from St Louis Fed president James Bullard and Cleveland Fed president Loretta Mester playing down the impact of recent market turmoil.

"A hike still looks odds on by year-end," ANZ Bank New Zealand chief economist Cameron Bagrie and economist Dylan Eades said in a note.

"The US dollar will remain firm, with comments from St Louis Fed President Bullard on Friday and Fed Vice Chairman Fischer over the weekend reaffirming that the Fed remains on track to lift interest rates this year."

ANZ expects the kiwi to trade between 64.20 US cents and 65.50 cents today.

In New Zealand today, July building consents data, the ANZ August business confidence survey, and a Reserve Bank release on July household credit are scheduled for release.

The New Zealand dollar was little changed at 90.22 Australian cents from 90.20 cents on Friday ahead of the Reserve Bank of Australia decision on interest rate decision tomorrow.

The kiwi advanced to 57.82 euro cents from 57.50 cents on Friday ahead of the European Central Bank decision on interest rates on Thursday.

The local currency advanced to 78.63 yen from 78.33 yen on Friday, slipped to 4.1289 yuan from 4.1372 yuan and was unchanged at 41.93 British pence.