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Kiwi falls as markets enter Xmas snooze

NZ Newswire logoNZ Newswire 21/12/2016 Jonathan Underhill

The New Zealand dollar has fallen, dropping back below US69 cents for a second day, as traders await third quarter gross domestic product and balance of payments data while market liquidity dwindles ahead of the Christmas-New Year holidays.

The kiwi traded at US69c as at 8am on Thursday in Wellington, and earlier dipped as low as US68.93c, from US69.30c late on Wednesday. The trade-weighted index fell to 76.95 from 77.29.

The New Zealand economy probably expanded at a 0.8 per cent pace in the third quarter, slowing from 0.9 per cent in each of the previous three quarters but keeping growth at an above-trend pace. That's likely to add to the case that the Reserve Bank is done cutting interest rates and may begin hiking the official cash rate, now at a record low 1.75 per cent, toward the end of 2017. The current account deficit probably widened to 3 per cent of gross domestic product from 2.9 percent, based on the consensus forecast of economists.

"GDP data later this morning could inject some life into the currency in illiquid market conditions," said BNZ currency strategist Jason Wong.

"It would only be temporary though, as it's hard to see data nearly three months dated changing the outlook much."

The Treasury has projected economic growth to average 3 per cent over the next five years, helping bolster the Crown's tax take and budget surpluses. Buoyant retailing probably lifted services sector growth while the construction industry is benefiting from a building boom in the face of record migration and a housing shortage in Auckland.

On Thursday morning, the local currency fell to 95.21 Australian cents from A95.55c late on Wednesday. It declined to 4.7872 yuan from 4.8177 yuan and dropped to 81.08 yen from 81.58 yen. The kiwi fell to 66.15 euro cents from 66.59c and declined to 55.87 British pence from 56p.

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