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Kiwi falls after hints of Fed rate hikes

NZ Newswire logoNZ Newswire 4/05/2017 Jonathan Underhill

The New Zealand dollar fell on Thursday after the latest Federal Reserve statement kept intact speculation that the US central bank will continue with the two rate hikes it has flagged for 2017.

And the first one could be in June.

The kiwi fell to US68.82c as at 5pm in Wellington from 69.48c late Wednesday. The trade-weighted index dropped to 74.95 from 75.37.

The Federal Open Market Committee downplayed signs of weakness in the US economy this year.

It said it "views the slowing in growth during the first quarter as likely to be transitory" while inflation was running close to its target and consumption "remained solid".

Meanwhile, the Reserve Bank of New Zealand releases its monetary policy statement on May 11 with little to suggest inflation has welled up since its last review.

Also with a kiwi dollar that's dropped 5.4 per cent on the trade-weighted basis this year and is sitting below the 76.1 level the bank projected it to average in the second quarter.

"It's a relative story. The Fed didn't give us that additional little bit of language that we're locked and loaded for next month but it also said (economic weakness in) the first quarter is likely to be transitory," said Robert Rennie, chief currency strategist at Westpac.

It is expecting Fed hikes in June and December.

"I'm sure many central banks are happy the Fed is on a path to normalisation and the RBNZ would be one of them," he said. Still, "I can't get too bearish about the kiwi below 68 cents."

The kiwi rose to A92.75c from 92.51c late Wednesday. It fell to 4.7403 yuan from 4.7872 yuan and declined to 77.60 yen from 77.84 yen. It slipped to 63.11 euro cents from 63.55 cents and dropped to 53.39 British pence from 53.81 pence.

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