The New Zealand dollar weakened on the suggestion US interest rates may rise sooner than previously expected, boosting demand for the greenback.
The kiwi slipped to 84.88 US cents at 8am from 85.13 cents at 5pm yesterday. The trade-weighted index dropped to 79.19 from 79.36 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, rose after St. Louis Federal Reserve Bank president James Bullard said if the US economy continues to improve at its current pace, sentiment will likely move to an earlier rate hike. Bullard, speaking to reporters following a speech to the Tennessee Bankers Association, said he currently forecasts the first rate hike to come in the first quarter of 2015 but he may bring that expectation forward as he prepares his June contribution for the Fed. He is not a voter on the Federal Reserve Open Market Committee this year.
The kiwi weakened because of "the Bullard comments which are talking about higher US rates sooner rather than later," said Tim Kelleher, head of institutional FX sales New Zealand for ASB Bank. "The central bank may raise rates sooner than many now think is what he said, which is US dollar positive."
In New Zealand today, economists will be eyeing the quarterly manufacturing sales data scheduled for release at 10:45am as they prepare their forecasts for first quarter GDP.
