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'Arm wrestle' continues for NZ dollar

NZ Newswire logoNZ Newswire 20/02/2017 Rebecca Howard

© Bloomberg The New Zealand dollar fell in subdued trading on Monday as traders looked ahead to the GlobalDairyTrade auction this week and the release of minutes of the latest Federal Reserve meeting.

The kiwi traded at US71.75 cents as at 5pm in Wellington versus US71.84c on Monday morning and little changed from late New York trading on Friday.

"It's a fairly directionless market so far," said Sheldon Slabbert, a sales trader at CMC Markets in Auckland, noting it's a holiday weekend in the US and so trading is light. He said the next catalyst will be the GlobalDairyTrade auction overnight Tuesday and then "with the lack of data this week from the US, the focus will be on Europe to drive sentiment."

He noted that the "arm wrestle" continues for the kiwi, which is caught between New Zealand's fairly resilient economic outlook and a growing view that the US Federal Reserve will lift rates in March.

Earlier Monday, fourth quarter producer price index data pointed to inflationary pressures, which may add to the view that New Zealand's central bank won't be able to keep rates on hold for as long as it is forecasting.

Prices paid by producers - input prices - rose 1 per cent in the three months ended December 31, while output prices, or prices received by producers, rose 1.5 per cent, Statistics New Zealand said.

The central bank kept rates on hold at 1.75 per cent earlier this month and didn't signal any rate increases until mid-2019. Economists are expecting the central bank to lift rates at some point in 2018.

The local dollar traded at 57.78 British pence versus 57.82 in New York. The kiwi traded at 67.61 euro cents from 67.67 cents. It was at 81.16 yen versus 81.06 yen. It was at A93.48 cents from A93.56c last week.

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