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Kiwi hits 18-month high against euro

NZ Newswire logoNZ Newswire 8/12/2016 Jonathan Underhill
The New Zealand dollar has risen against the euro. © Getty Images The New Zealand dollar has risen against the euro.

The New Zealand dollar has risen to an 18-month high against a broadly weaker euro after the European Central Bank extended its asset purchase programme by nine months and signalled it isn't about to exit the market.

The kiwi dollar traded at 67.57 euro cents as at 8am on Friday in Wellington and earlier touched 67.71c, the highest since May 2015.

The local currency fell to US71.69 cents from US72.10c on Thursday as the ECB's decision also helped lift the greenback.

ECB President Mario Draghi surprised financial markets by extending the bank's bond-buying programme longer than expected to the end of 2017, while trimming the overall target to 60 billion euros a month from 80 billion euros starting April.

The changes didn't signal a winding down of a quantitative easing programme that has seen the ECB spend more than 1.4 trillion euros buying bonds.

"There is no question about tapering," Mr Draghi said.

The kiwi dollar touched a month-high of US72.22c on Thursday after Reserve Bank Governor Graeme Wheeler gave an upbeat account of New Zealand's economic outlook.

That was followed by the government's half-year rconomic and fiscal update, which projected economic growth averaging 3 per cent a year for the next five years, swelling the tax take and allowing the government to increase spending on infrastructure such as Auckland's City Rail Link.

"The rhetoric in the (Wheeler) speech was fairly upbeat with comments noting a positive growth outlook. To us, it was mildly hawkish," said BNZ senior economist Doug Steel.

On Friday morning the kiwi was little changed at 96.16 Australian cents, having climbed to a month high of A96.36c on Thursday, as the Treasury's stronger economic growth forecasts and Mr Wheeler's upbeat comments contrasted with views of the Australian economy, which shrank a greater-than-expected 0.5 per cent in the third quarter.

The kiwi was little changed at 57.01 British pence, fell to 4.9316 yuan from 4.9586 yuan and traded at 81.80 yen from 81.77 yen.

The trade-weighted index was at 78.78 from 78.86.

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