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Kiwi falls as oil production curbs limited

NZ Newswire logoNZ Newswire 25/05/2017 Jonathan Underhill

The New Zealand dollar has fallen after the Organisation of Petroleum Exporting Countries agreed to extend production curbs that didn't go as far as the market had expected, driving down the price of crude oil and weighing on commodity-linked currencies.

The kiwi fell to US70.23 cents as at 8am on Friday in Wellington from US70.41c late Thursrday. The trade-weighted index was little changed at 75.95 from 75.98.

Opec and producers such as Russia agreed overnight to extend curbs on oil output of 1.8 million barrels a day to the end of March 2018, less than some oil traders had deemed enough to alleviate a glut of crude oil.

Brent crude dropped 4.7 per cent to $US51.37 a barrel and the CRB Index of 19 commonly traded commodities fell 1.5 per cent. The Australia and Canadian dollars also declined.

While the agreement to extend production curbs "was widely anticipated, some had expected further reductions in production to offset the soaring output from US shale producers", said BNZ currency strategist Jason Wong.

"Commodity currencies have suffered as a result."

The kiwi and local interest rates didn't move much after Budget 2017 was announced on Thursday including the Treasury's forecast for New Zealand's economic growth to peak in 2019 at an annual pace of 3.8 per cent.

The pace of economic growth filled the government's coffers more than expected, giving Finance Minister Steven Joyce room to return cash to taxpayers through higher income thresholds for the lowest tax bands while spending the rest in a $32.5 billion infrastructure pipeline over the next four years.

On Friday morning, the kiwi rose to 94.15 Australian cents from A93.84c on Thursday and fell to 4.8215 yuan from 4.8373 yuan. It was little changed at 62.63 euro cents and traded at 54.23 British pence from 54.21p. It traded at 78.48 yen from 78.56 yen.

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