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Kiwi down as Fed rate hike talk ups dollar

NZN 2/03/2017 Jonathan Underhill

The New Zealand dollar fell on Thursday amid growing speculation the US Federal Reserve will hike interest rates in March in an economy showing more signs of life and a president whose policies are seen to be stimulatory.

The kiwi dollar declined to US71.33 cents as at 5pm in Wellington from 71.45c late Wednesday and from 72.17c early Wednesday.

The US dollar index rose to its highest level since January 12 overnight after New York Federal Reserve President William Dudley talked up the prospects for US interest rate hikes while San Francisco Fed president John Williams said he saw no need to delay such a move in the face of stronger US employment and inflation.

The Fed's Mr Dudley told CNN that the case for raising interest rates "has become a lot more compelling" given Donald Trump's election as president and a Republican-controlled Congress.

"There's been a definite shift toward the Fed going in March," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

The kiwi didn't move much after Reserve Bank governor Graeme Wheeler reiterated that he was comfortable with economic projections underpinning its bias to keep the official cash rate on hold until the middle of 2019, which was outlined in the last monetary policy statement.

The New Zealand dollar traded at A93.18c from 93.23c on Wednesday when it tumbled after figures showed Australia's economy grew 1.1 per cent in the three months through December.

The local currency rose to 58.10 British pence from 57.77 pence and traded at 67.73 euro cents from 67.77 cents. It rose to 81.28 yen from 81.02 yen and fell to 4.9096 yuan from 4.9143.

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