The New Zealand dollar fell to a week low as the Federal Reserve signalled an end to its quantitative easing programme which has debased the greenback.
The kiwi slid to 78.49 US cents, the lowest since June 12. The local currency recently bought 78.86 US cents, down from 79.88 at 5pm in Wellington yesterday. The trade-weighted index weakened to 73.90 from 74.12 yesterday.
Fed chairman Ben Bernanke said the central bank may reduce its US$85 billion a month bond buying programme this year and end it next year should the world's largest economy continue to improve. The US dollar index, which measures the greenback against six of its peers, jumped to a nine-day high as investors bet on more attractive growth and investment opportunities in the US.
"The New Zealand dollar has been strong against US dollar weakness," said Sam Tuck, senior manager FX at ANZ New Zealand. "People are now reallocating money back into the US dollar so the relative gap has closed."
The Federal Open Market Committee said at the conclusion of a two-day meeting in Washington that risks to the US economy have decreased, as they lowered forecasts for unemployment and inflation this year.