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Kiwi falls as global rate hikes loom

NZ Newswire logoNZ Newswire 29/06/2017 Paul McBeth
New Zealand coin is arranged for a photograph in Wellington, New Zealand © Mark Coote New Zealand coin is arranged for a photograph in Wellington, New Zealand

The New Zealand dollar has fallen as investors rethink the globally low interest rate environment with a Bank of England senior official joining the growing chorus of central bankers musing on the end to ultra-loose monetary policy.

The kiwi dropped to US72.91 cents as at 8am on Friday in Wellington, from US73.18c on Thursday. The trade-weighted index declined to 78.05 from 78.37.

Stocks on Wall Street fell and the yield on 10-year US Treasuries rose 5 basis points to 2.27 per cent as investors took on board the growing number of central bankers signalling a move to higher interest rates after extraordinarily loose policies for almost a decade.

The US Federal Reserve has already started raising rates as the world's biggest economy continues to show robust growth, and BoE chief economist Andy Haldane is the latest among central banker officials to say higher rates need to be looked at seriously to head off inflation.

"The tonal tide is turning in the central bank halls in London, Frankfurt and DC," ANZ senior rates strategist David Croy said.

"Haldane's reiteration overnight that 'we need to look seriously at the possibility of raising interest rates' has added fuel to FX moves, and it is this changing major market central bank vibe that is at the heart of our cautious NZD view."

On Friday morning, the kiwi fell to 63.77 euro cents from 64.15c after German inflation was higher than expected, and touched a new three-week low against the British pound trading at 56.08 pence as at 8am from 56.46p.

It dropped to 94.86 Australian cents from A95.52c as recovering iron ore prices bolster demand for the Aussie dollar. The local currency fell to 4.9489 Chinese yuan from 4.9552 yuan and dropped to 81.78 yen from 82.10 yen.

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