The New Zealand dollar fell as the run of Federal Reserve officials speaking ahead of next week's policy review has investors pondering the prospects of an early interest rate hike by the world's biggest central bank.
The kiwi traded at 73.17 US cents at 5pm in Wellington from 73.14 cents at 8am and down 73.33 cents on Friday in New York. The trade-weighted index dropped to 77.93 from 78.37 last week.
Traders will closely watch a speech by US Federal Reserve Governor Lael Brainard, a voting member of the Federal Open Market Committee, before a black-out period is imposed ahead of next week's review for a steer on where monetary policy is heading.
The speech was only announced last week and will follow comments by Boston Fed President Eric Rosengren who warned that the central bank might risk overheating the US economy if it waited too long before raising rates again.
"People started toying with the idea that perhaps they're still going to go and there have been comments out of the Fed that are leaving that door open," said Philip Borkin, senior economist at ANZ.
Still, ANZ's Borkin said the strength of the domestic economy has underpinned the kiwi's strength and he doesn't expect it to fall far from its recent highs.
That will continue to make life difficult for the Reserve Bank as it tries to stave off weak inflation expectations becoming entrenched by a strong currency making imports cheaper, while at the same time weighing up the pace of economic growth, the prospect of a smaller than average current account deficit and the recovery in global dairy prices, which Borkin said provide fundamental reasons for the kiwi to be in demand on top of New Zealand's relatively high interest rates.
Government data on Monday showed guest nights were at a record for the month of July as large tourist volumes continue to flock to New Zealand.
The two-year swap rate increased one basis point to 2.01 percent, and 10-year swaps advanced six basis points to 2.53 percent.
The local currency was little changed at 97.09 Australian cents from 97.10 cents last week and slipped to 4.8857 Chinese yuan from 4.8982 yuan. It declined to 65.07 euro cents from 65.25 cents last week and traded at 55.12 British pence from 55.26 pence. The kiwi decreased to 75.03 yen from 75.24 yen last week.