By Paul McBeth
The New Zealand dollar is heading for a 1.3 percent gain this week as demand for the greenback waned after the US Federal Reserve scaled back planned rate hikes because of weakening prospects for the global economy.
The kiwi rose to 68.39 US cents at 5pm in Wellington from 67.50 cents on Friday in New York last week. It traded at 68.57 cents at 8am, up from 67.70 cents on Thursday.
The trade-weighted index rose to 72.29 from 71.98 last week, and is heading for a 1.1 percent weekly gain.
The US dollar index, a measure of the greenback against a basket of currencies, dropped to a five-month low as traders scaled back their holdings in the world's reserve currency after the Fed this week lowered its projected rate hikes to two from a previous four.
Fed chair Janet Yellen latched on to the volatility in the global financial markets. While noting strength in the US economy, she said signs of domestic inflation may be transitory.
"We're watching the US data, and the US data is telling us it's the Fed that has been spooked and not the US economy," said Sam Tuck, senior foreign exchange strategist at ANZ Bank in Auckland. The 68.50/69 US cents area where the kiwi is trading "is quite an important level" and if it breaks higher, the currency "can go above 70."
New Zealand's two-year swap rate fell two basis points to 2.22 percent at 5pm in Wellington, and 10-year swaps declined three basis points to 3.01 percent.
The local currency climbed to 89.31 Australian cents from 88.96 cents on Thursday and advanced to 4.4204 Chinese yuan from 4.3991 yuan. It was little changed at 60.39 euro cents from 60.32 cents on Thursday and fell to 47.28 British pence from 47.48 pence. The kiwi edged down to 76.05 yen from 76.14 yen.