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Kiwi falls from 16-month high

NZ NewswireNZ Newswire 5/09/2016 Jonathan Underhill

The New Zealand dollar has fallen from near a 16-month high on a trade-weighted basis but is still seen as sufficiently above the levels projected by the Reserve Bank to warrant another cut to the official cash rate in coming months.

The kiwi traded at US73.01 cents as at 8am on Tuesday in Wellington, from US73.35c late on Monday. The trade-weighted index was at 77.71, from as high as 78.06.

The TWI is more than 2 per cent above the average level the Reserve Bank projected for the third quarter.

A strong currency has been keeping imported inflation at bay, giving the central bank a tougher job to return inflation to its targeted 1- to- 3-per cent range. The consumers price index rose just 0.4 per cent on an annual basis in the second quarter.

"A resilient currency and continued low CPI readings are key reasons to expect the RBNZ to cut the OCR again by year-end," BNZ senior market strategist Kymberly Martin said in a note.

"We expect a cut in November."

The kiwi may get a further boost from Tuesday night's GlobalDairyTrade auction, which is expected to show another increase in milk powder prices.

Ahead of the auction, traders will be watching for wholesale trade data today for the second quarter and the Reserve Bank of Australia's review of interest rates, which isn't expected to result in a change.

On Tuesday morning, the New Zealand dollar fell to 96.27 Australian cents from A96.47c late on Monday. It declined to 75.54 yen from 75.79 yen and slipped to 4.8734 yuan from 4.8959 yuan. It fell to 65.51 euro cents from 65.63c and dropped to 54.87 British pence from 55.05p.

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