The New Zealand dollar fell against a broadly stronger greenback in the face of rising yields on US Treasuries and expectations the US economy is strong enough to see the Federal Reserve continue hiking interest rates this year.
The kiwi dollar declined to 72.70 US cents as at 8am in Wellington, and earlier fell as low as 72.58 cents, the lowest in almost two weeks, from 73.23 cents late yesterday. The trade-weighted index dropped to 74.63 from 74.92.
The yield on 10-year US Treasuries climbed as high as about 2.93 percent overnight, a level it has only topped a handful of times this year and the US dollar index rose as high as 89.95, a week-high.
The consumers' price index rose 0.5 percent in the three months to March 31, while annual inflation was 1.1 percent, Statistics New Zealand said. The result was in line with the median of 12 economists surveyed by Bloomberg and compares to the Reserve Bank's quarterly projection of 0.6 percent and 1.1 percent. While traders debate whether the Fed will hike rates two or three more times this year, New Zealand first-quarter inflation data yesterday, with annual inflation slowing to a relatively tepid 1.1 percent, reinforced expectations the Reserve Bank won't raise interest rates anytime soon.
"We didn't think there much in the CPI report to materially shift our expectations for monetary policy," said Nick Smyth, interest rate strategist at Bank of New Zealand, in a note. "The NZD has since declined to around 0.7265, around a two week low, in sympathy with the broader strength in the USD and decline in equities."
