With two or three more hikes expected from the US Federal Reserve this year, the US dollar may extend its yield advantage over the New Zealand 10-year government bond, which traded at a yield of 2.95 per cent at 5pm in Wellington.
New Zealand's Reserve Bank isn't expected to raise the official cash rate this year. Still, that interest rate differential hasn't pushed up the greenback as forcefully as predicted, with political uncertainties reducing investors' convictions on the future direction of the world's reserve currency.
"We've seen the currency [kiwi] come off in the last few days, but it's still a long way away from where you'd say rate differentials should justify it," said Philip Borkin, a senior macro-economist at ANZ Bank New Zealand.
"When you get politics thrown in the mix, no one really has a lot of visibility or conviction because it changes from week to week, and that just complicates the picture."
Still, Borkin said the "big broad fundamentals" justify a weaker kiwi dollar over time.
New Zealand's two-year swap rate increased 1 basis point to 2.30 per cent and the 10-year swap rate gained 5 basis points to 3.26 per cent.
Local data today showed credit card spending rose at an annual pace of 7.2 per cent in March over March last year. Tomorrow's travel and migration figures are expected to show population and tourism growth still supporting the economy.
The kiwi traded at A93.76c from A93.66c on Friday in New York, and increased to 4.5342 Chinese yuan from 4.5295 yuan. It rose to 77.68 yen from 77.46 yen last week and gained to 58.78 euro cents form 58.56 euro cents. The kiwi traded at 51.41 British pence from 51.35 pence last week.
