The New Zealand dollar is heading for a 1.8 per cent weekly decline amid domestic political uncertainty and a stronger US dollar as investors price in a greater chance of a US rate hike in December.
The kiwi was trading at US72.10c at 5pm today from US71.92c late on Thursday and from US73.39c a week ago. The trade-weighted index rose to 76.11 from 76.03 on Thursday.
The greenback is benefiting as Fed funds futures now imply around a 73 per cent chance of a Fed rate hike at the December 12-13 policy meeting after strong data and a raft of Fed speakers this week. President Donald Trump's proposals for tax cuts also helped shore up the greenback, although the lack of detail on how it will be funded is limiting the gains, traders said.
The New Zealand dollar, meanwhile, is likely to be restrained as both the National Party and the Labour-Green bloc seek to form a Government with New Zealand First, led by Winston Peters.
"Going into next week, the kiwi remains vulnerable to the downside as we await the outcome of where New Zealand First will lay their hat," said Stuart Ive, OMF private client adviser. Peters has said he won't make a decision until all votes are counted on October 7.
