NZ dollar hits fresh monthly high as doubts grow about Fed rate hikes

New Zealand's two-year swap rate increased one basis point to 2.65 per cent at 5pm in Wellington, and 10-year swaps rose one basis point to 3.46 per cent.

The New Zealand dollar hit a new month-high as doubts grow as to whether the Federal Reserve will continue hiking interest rates this year, damping demand for the greenback.

The kiwi touched 67.46 US cents, and was trading at 67.25 cents at 8am in Wellington, from 66.67 cents at 5pm yesterday. The trade-weighted index increased to 72.92 from 72.61 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, fell to its lowest level in more than three months as traders pare back their bets on a rising US dollar amid concern that weaker global growth may prompt the Fed to hold off on raising interest rates any time soon.

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Dallas Fed president Robert Kaplan said the central bank should be "patient" on rate increases, reiterating recent comments from other Fed officials. The lower greenback boosted commodity prices and increased the lure of higher yielding currencies, underpinning the kiwi.

"US monetary authorities are clearly concerned about the growth prospect in H1 of this year and that has totally killed sentiment for a dollar rally," Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York, said in a note.

"The commodity currencies are getting the double benefit of stronger commodity prices and higher yields," he said. "With the Fed likely to remain stationary for the time being carry traders have ploughed back into kiwi and Aussie."

Today, investors are awaiting the key US nonfarm payrolls report, which is expected to show US employers added 190,000 workers in January, while the unemployment rate remained at 5 percent.

In Australia, retail sales data for December is scheduled for release and the Reserve Bank of Australia publishes its Statement on Monetary Policy.
The New Zealand dollar rose to 93.30 Australian cents from 92.78 cents yesterday, increased to 46.20 British pence from 45.77 pence, and advanced to 4.4142 yuan from 4.3849 yuan. It slipped to 78.41 yen from 78.62 yen yesterday, and declined to 59.97 euro cents from 60.10 cents.