Weaker outlook has kiwi dollar taking a slide

New Zealand's two-year swap rate was unchanged. Photo / File

The New Zealand dollar was headed for a weekly drop of 1.5 per cent after weaker forecasts for economic growth and budget surpluses from Treasury, and ahead of headlines from the central banker's symposium in Jackson Hole.

The kiwi was at US72.03c at 5pm today versus US72.08c at 8am and down from US72.23c late on Thursday. It was at US73.12c a week ago in New York. The trade-weighted index fell to 75.86 from 76.04 on Thursday.

Federal Reserve chair Janet Yellen is slated to speak tomorrow in the US followed later in the day by Mario Draghi, president of the European Central Bank.

Yellen's speech will be closely scrutinised for any hints on when the Federal Reserve may begin balance-sheet reduction, whereas Draghi could comment on the euro's recent strength.

"That's all that's going on," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. He said there could be some sharp moves given that it will be the end of the trading week in the US and liquidity could be thin.

"You don't really want to be running a great deal of risk into that," he said, adding that increased dollar strength is the biggest risk given how the market is positioned.

BNZ head of research Stephen Toplis said he still believes the New Zealand dollar will weaken by the end of the year as the Fed delivers on its tightening cycle and US indicators improve.

The NZ dollar was at A91.20c from A91.41c on Thursday. It eased to 61.07 euro cents from 61.19c and fell to 56.24 British pence from 56.48p. The kiwi dropped to 4.8007 yuan from 4.8124 yuan and was at 78.95 yen from 78.82 yen.

New Zealand's two-year swap rate was unchanged at 2.17 per cent and 10-year swaps fell 1 basis point to 3.12 per cent.