NZ dollar holds above 68 US cents

The New Zealand dollar continued to hover around 68 US cents. Photo / File

The New Zealand dollar continued to hover around US68c as the greenback was supported by higher US bond yields and as geopolitical concerns weighed on the euro.

The kiwi dollar traded at US68.01c at 5pm from US68.07c at 8:30am and US68.11c late yesterday. The trade-weighted index was at 72.19 from 72.27 yesterday.

The yield on the US two-year Treasury was at a nine-year high 1.755 per cent as investors price in more rate hikes from the US Federal Reserve.

Chair Janet Yellen is scheduled to speak tomorrow in New York, while minutes to the last Federal Open Market Committee are due for release on Thursday. The greenback is getting boosted on two fronts with the prospect of higher rates coinciding with dwindling demand for the euro after coalition talks in Germany broke down.

The New Zealand dollar remains "under a bit of pressure," said ANZ Bank New Zealand senior economist Phil Borkin.

Markets have been a bit "jittery" on geopolitical tensions, including a political crisis in Germany after German Chancellor Angela Merkel's failure to form a three-way coalition government and "NZD doesn't perform as well in a more volatile environment".

The Australian and the New Zealand dollar have also lost ground as their respective central banks are seen as being firmly on hold while the Fed is poised to hike.

"Antipodean currencies are out of favor," said Borkin.

New Zealand's two-year swap rate was unchanged at 2.15 per cent while 10-year swap rate was unchanged at 3.11 per cent.

Looking ahead, Borkin said the overnight Global Dairy Trade auction will be closely watched.

Dairy prices have fallen in the past three auctions and the futures are currently pointing to a slight rise in whole milk powder prices. If the result were to disappoint, it would add to the pressure on the kiwi, he said.

The kiwi traded at 57.95 euro cents from 58.03 cents yesterday and at 90.23 Australian cents from 90.15 cents. It fell to 51.35p from 51.59p. The local currency traded at 4.5135 yuan from 4.5186 yuan and rose to 76.55 yen from 76.29 yen.