The New Zealand dollar fell, and is heading for a 0.4 per cent weekly decline, as a scandal surrounding Brazil's President Michel Temer took the spotlight off US President Donald Trump and US data printed strong enough to keep intact bets on a US rate hike next month.
The kiwi dollar fell to US68.89c from US69.28c late on Thursday. The trade-weighted index fell to 74.75 from 75.06 on Thursday.
Among the recent evidence the US economy is strong enough to warrant higher interest rates, the Philadelphia Fed business outlook index for May jumped to 38.8, about twice the 18.5 level estimated by economists, while a Reuters poll revised up the forecast for US GDP in the second quarter. Separately, Loretta Mester, president of the Federal Reserve Bank of Cleveland, said the Fed needed to keep raising rates if economic conditions continue as expected and also should begin the process of shrinking its balance sheet.
"If quantitative easing debased the US dollar then quantitative tightening should have the opposite effect," said Mark Johnson, senior dealer at OMF. "The market has pretty much priced in that the Fed will hike in June."
Fed funds futures are pricing in a 70 per cent chance that the Federal Reserve will raise interest rates in June.
