NZ dollar extends slide

The New Zealand dollar extended its decline to a seven-week low as growing speculation the Federal Reserve will hike interest rates this month put the focus on a speech by Fed chairwoman Janet Yellen tonight.

The kiwi dollar fell to 70.54USc and earlier touched 70.46USc, the lowest since January 12, from 71.33USc late yesterday. The trade-weighted index fell to 77.34 from 77.90.

The US dollar index rose to its highest level since early January as a third Fed official this week, Fed governor Lael Brainard, said tighter monetary policy "will likely be appropriate soon." Her comments in notes for a speech to Harvard University follows those of New York Fed president William Dudley and San Francisco Fed president John Williams, who both indicated a rate hike made sense. Labor Department figures showing Americans filing for unemployment benefits fell to a 44-year low last week have also stoked expectations of an imminent rate hike and increased the focus on Mrs Yellen's speech in Chicago on Friday.

"The countdown is now on to Mrs Yellen's speech, which in all likelihood will determine whether the market has been correct in pushing odds of a March hike to close to 100 percent, therefore boosting the US dollar," said Philip Borkin, senior economist at ANZ Bank New Zealand, in a note. "Perhaps the more important questions then are what the Fed does with its dot-plots and whether we also need to start considering prospects and timing of a potential unwind in asset purchases."

The dot-plots are in the Federal Open Market Committee's summary of economic projections and show where members see the fed funds rate over the next few years.

Locally, traders will be watching figures on the value of building work for the fourth quarter, to round out their view of the state of activity in the property market.

The New Zealand dollar traded at 93.22Ac from 93.18Ac. The local currency fell to 57.57 British pence from 58.10 pence and declined to 67.16 euro cents from 67.73 cents. It fell to 80.78 yen from 81.28 yen and dropped to 4.8579 yuan from 4.9096 yuan.

(BusinessDesk)