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The New Zealand dollar fell after Federal Reserve chair Janet Yellen gave a more hawkish view of the US economy and tensions rose over Ukraine, sapping risk appetite. The kiwi extended its slide amid talk the central bank may have intervened in the market.
The kiwi fell to 83.45 US cents at 5pm in Wellington from 84.07 cents in late New York trading on Friday. It earlier dropped as low as 83.41 cents as traders speculated the Reserve Bank may have been selling. The trade-weighted index fell to 78.78 from 79.18 on Friday.
Yellen said in a speech at a central bank retreat at Jackson Hole, Wyoming, that while there was still slack in the US labour market, a return to higher interest rates could come sooner than thought and then at a quicker pace. Meantime, a Russian supply convoy pushed into rebel-held eastern Ukraine even after the Red Cross pulled out of a joint effort and Nato chiefs said the convoy may contain military equipment.
"The bigger story here is that the US dollar is in a very powerful uptrend," said Imre Speizer, strategist at Westpac Banking Corp. "We're at the beginning of a very long move higher in the US dollar. The kiwi might fall further because it is in a bit of an economic soft patch."
Russia's forays into Ukraine had stoked risk aversion, weighing on growth-linked currencies such as the kiwi, Speizer said.
The kiwi dropped sharply during local trading as some traders speculated the Reserve Bank had intervened in the market, having previously flagged its willingness to do so. Traders speculated today's sharp drop could have been caused by the central bank taking advantage of thin liquidity on a Monday morning, although, the currency's move could also be attributed to a large options or hedging transaction by a trading bank, they said.
The Reserve Bank, which declined to comment, releases details of its July foreign exchange transactions later this week and this month's data won't be released until September.
The New Zealand dollar traded at 63.19 euro cents from 63.29 cents on Friday. It fell to 86.97 yen from 87.25 yen and dropped to 89.56 Australian cents from 90.24 cents. It declined to 50.39 British pence from 50.70 pence.