NZ dollar drops more than half a US cent on upbeat Federal Reserve report

The New Zealand dollar dropped more than half a US cent.

The New Zealand dollar dropped more than half a US cent after upbeat comments from the US Federal Reserve and news Apple Inc's tax bill and investment plans will see more funds flow into the US may have galvanised investors to crystallise recent strength in the kiwi.

The kiwi fell to 72.58 as at 12pm in Wellington from 73.25 cents at 8am while the trade-weighted index dropped to 74.83 from 75.25.

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The greenback rallied across the board, with the Dollar Index up 0.6 per cent, in the early New Zealand trading session, which included the release of the Fed's 'beige book', a roundup of anecdotal regional economic information, showing US business activity is expanding and wages continue to push higher.

Overnight, Dallas Federal Reserve Bank president Robert Kaplan and Chicago Federal Reserve Bank President Charles Evans were also upbeat on the economy.

Demand for the greenback will also bolstered by Apple's announcement for a new set of investments in the US taking its total commitment to US$350 billion ($481b) over the next five years.

At the same time, the world's biggest tech company said it anticipates repatriation tax payments of approximately US$38b as required by recent changes to the tax law, or about 15 per cent of its foreign cash holdings.

Tim Kelleher, head of institutional foreign exchange sales at ASB Bank, said the combination of the upbeat Fed and Apple's repatriation of US dollars may have triggered the greenback's gain.

The slide in the kiwi coincided with a sell-off in other currencies including the euro and the British pound, which were also looking stretched, he said.

"It's all US dollar driven and these currencies have come a very long way in a short time," Kelleher said, noting the kiwi is up about 5 US cents since December 8, which is "probably pushing it." Kelleher said he struggled to see why the kiwi would be at a premium and the US weaker when the Federal Reserve is hiking rates.

Bank of New Zealand senior markets strategist Jason Wong said the kiwi started 2018 on a strong note, but that "positive momentum isn't expected to be sustained" as tighter global monetary policy is expected to be a headwind.