The New Zealand dollar has fallen against the US dollar, touching a three-week low, after Federal Reserve chair Janet Yellen said the central bank needs to push on with gradual rate hikes despite weak inflation.
New Zealand currency (file picture).
The kiwi dropped to US72.04 cents as at 8am today in Wellington, and earlier touched UC71.67c, from US72.45c late yesterday. The trade-weighted index fell to 75.75 from 75.91.
In a speech to the US National Association of Business Economics, Yellen said there was a risk the labour market would become overheated without further increases in the fed funds rate and that "persistently easy policy can hurt financial stability".
Newly appointed Atlanta Federal Reserve Bank president Raphael Bostic also signalled a willingness to tighten monetary policy, saying there were more consistent signs of inflation.
"While the local focus is obviously election-related, and we suspect ongoing uncertainty will at least cap the upside until (there is) more clarity, we were reminded overnight of far bigger forces shaping currency direction, namely that the US Fed still plans to 'get on with it'," said ANZ senior economist Sharon Zollner.
"Chair Yellen tried to strike a balanced tone in her speech overnight, but was tilted towards the hawkish side."
The kiwi fell on Tuesday after business confidence fell to a net zero reading with as many pessimists as optimists. According to the ANZ Business Outlook survey, the September result is down from a net 18.3 per cent of firms that expected general business conditions to improve over the coming year in August.
Today the kiwi traded at 61.06 euro cents from 61.08c late yesterday. It traded at 80.80 yen from 80.78 yen, fell to 53.55 British pence from 53.73p and rose to 91.29 Australian cents from A91.17c. It slipped to 4.7807 yuan from 4.7926 yuan.