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Kiwi dips as US eyes rate hikes

NZ Newswire logoNZ Newswire 14/02/2017 Paul McBeth

The New Zealand dollar has fallen after Federal Reserve chair Janet Yellen kept open the chance of a rate hike next month as the world's biggest central bank tightens monetary policy, pushing up yields on US Treasuries and stoking demand for the greenback.

The kiwi slipped to US71.55 cents as at 8am on Wednesday from US71.75c on Tuesday. The trade-weighted index edged down to 78.03 from 78.17.

Dr Yellen told the US Senate's banking committee that a "gradual rise in rates will be required" and that waiting too long "would be unwise".

While she wasn't specific on when the next hike would come, she kept alive the possibility it could be as early as next month. Yields on US 10-year treasuries rose 4 basis points to 2.48 per cent and the US dollar index was up 0.3 per cent to 101.27.

"Yellen played a straight bat and broadly reiterated her previous messaging, forecasting ongoing progress toward the Fed's goals and gradual policy tightening," BNZ currency strategist Jason Wong said in a note.

"With risk appetite remaining high, with the VIX index hovering down around 11, that takes the NZD further away from our fair value estimate around the 74 (US cents) mark."

On Wednesday morning, the kiwi traded at 57.38 British pence from 57.24p on Tuesday after UK inflation figures were weaker than expected, and it was little changed at 67.68 euro cents from 67.67c as Italian and German gross domestic product were a touch below forecasts.

It was unchanged at 93.52 Australian cents after the National Australia Bank survey showed firms were increasingly optimistic across the Tasman. It rose to 81.77 yen from 81.48 yen and fell to 4.9118 Chinese yuan from 4.9354 yuan.

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