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Kiwi falls on resumption of 'Trump trade'

NZ Newswire logoNZ Newswire 9/02/2017 Jonathan Underhill

The New Zealand dollar has fallen to its lowest level since January 23 after US President Donald Trump hinted at tax cuts within weeks and after Reserve Bank governor Graeme Wheeler said interest rates wouldn't rise any time soon.

The New Zealand dollar fell as low as US71.72 cents and traded at US71.84c as at 8am on Friday in Wellington from US71.96c late on Thursday. The trade-weighted index was little changed at 78.32.

Mr Trump told airline executives that he would be announcing "something phenomenal in terms of tax" in the next few weeks, comments that helped lift the greenback, pushed up US bond yields and helped lift the Standard & Poor's 500 Index to a record high.

That weighed on the kiwi, which had sold off after Thursday's RBNZ monetary policy statement adopted a neutral tone and projected the official cash rate to rise just 25 basis points by 2020, dashing some market speculation that the central bank could hike as soon as this year.

Mr Trump's comments "saw the 'Trump trade' resume", said ANZ senior rates strategist David Croy.

"The kiwi continues to languish in the wake of yesterday's very neutral RBNZ MPS. Fair enough too, with the governor warning that the rates market had gotten a bit too far ahead of itself pricing in so much tightening."

On Friday morning the kiwi fell to 94.14 Australian cents from A94.40c late Thursday. It traded at 57.44 British pence from 57.49p and was at 67.39 euro cents from 67.31c. The kiwi rose to 81.33 yen from 80.68 yen and fell to 4.9305 yuan from 4.9423 yuan.

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