NZ dollar heads lower
The New Zealand dollar has shed more than 3 cents since the start of the week, after the greenback extended recent gains and local data came in below expectations.
The kiwi was trading at US77.46c at 8am. The trade-weighted index, which measures dollar performance against a basket of currencies, slipped lower to 78.4.
The US dollar index, hit a peak of 82.145, the strongest since June 6.
The greenback climbed to two-week highs against major currencies yesterday, and looked likely to extend gains after the United States Federal Reserve signalled it would begin withdrawing its US$85 billion (NZ$109.7b) a month bond-buying programme this year as the economy improves.
"The committee sees the downside risks to the outlook for the economy and the labour market as having diminished since the fall," the Federal Reserve said.
The recent spate of US dollar buying has seen the kiwi lose more than 3c from its Monday high of US80.99c, and analysts expected it to stay down for the coming months.
Yesterday's weaker-than-expected gross domestic product (GDP) figures added insult to injury.
In official figures, the economy grew slower than the 0.5 per cent expected, which was seen as a "downside surprise" by some economists.
The economy was caught between the considerable impact of the drought and the Canterbury rebuild.
The "modest" March quarter growth in economic activity followed a rise of 1.5 per cent in the December 2012 quarter.
Some economists said the weak March quarter reflected a "payback" from the strong growth at the end of last year.
Economists said the slower-than-forecast growth in the March quarter was not expected delay the Reserve Bank's first move to lift official interest rates in March next year, nor keep rates lower for longer.
Westpac market strategist Imre Speizer said the drop in the kiwi was mostly due to the Federal Reserve announcement, and GDP figures were a side story.
Speizer expected the local currency to fall to just above US77c in the coming days.
After that the kiwi was likely to track towards US74.55c, he said.
"It'll go a lot further in the coming months."
However, the drop in the New Zealand dollar will be welcomed by exporters who have been fighting the high dollar for a while.
"They'll love it," Speizer said.
The New Zealand dollar was still up against the aussie, which was feeling the effects of a slowing economy and renewed US dollar strength.
The kiwi was trading at 84.24 Australian cents this morning, after testing the A85c mark during the past two days.
- © Fairfax NZ News