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Kiwi comes back into favour on cross trade

NZN 29/05/2017 Jonathan Underhill

The New Zealand dollar rose against its Australian counterpart on Monday on speculation that a relatively stronger domestic economy and lack of exposure to international commodity prices such as iron ore favours the kiwi over the Aussie.

The kiwi rose to A94.95c as at 5pm in Wellington, having started the week at 94.68c from 94.96c in New York on Friday.

The kiwi pared its gains against the US dollar, trading at US70.67c from 70.44c at 8am in Wellington and from 70.71c in New York on Friday.

Some figures this month have cast doubt on whether the Australian economy is robust.

The Westpac-Melbourne Institute survey of consumer sentiment fell 1.1 per cent in May while last week.

Treasury secretary John Fraser said the government is closely watching high levels of household indebtedness, which have left that economy vulnerable to a downturn.

By contrast, New Zealand's Budget 2017 and Fonterra's forecast payout upgrade have brightened sentiment for the kiwi.

"The kiwi is getting bought and the Aussie is being sold," said Graham Parlane, private client manager at OMF.

"There's still a bit of a hangover from the well-received budget and Fonterra's forecast. There's some positive vibes coming out of Kiwi land and some negatives out of Australia."

Mr Parlane said with the US dollar, the market is caught between a number of factors including whether President Donald Trump can enact policies that might drive US economic growth.

With little domestic economic news scheduled, traders will likely look for offshore events to drive the direction to the kiwi.

The kiwi fell to 4.8413 yuan from 4.8269 yuan on Friday. It was little changed from Friday at 63.28 euro cents and dropped to 55.05 British pence from 55.18 pence. The local currency traded at 78.68 yen from 78.60 yen in New York on Friday.

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