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Kiwi hits four-week low as OCR cut tipped

NZ NewswireNZ Newswire 25/09/2016

The New Zealand dollar has fallen to a four-week low as traders increased bets the Reserve Bank will cut the official cash rate in November after the bank last week cited "sustained" weakness in inflation.

The kiwi dropped to US72.28 cents at 8am on Monday in Wellington, having touched US72.22c in late New York trading on Friday, the lowest since August 31 and down from US72.74c in Wellington at the end of last week.

The trade-weighted index declined to 76.87 from 76.90 in New York and from 77.20 in late Asian trading on Friday.

Last Thursday, RBNZ governor Wheeler kept the OCR at 2 per cent, saying more easing was on the cards to get inflation back within the target band of 1-to-3 per cent.

Consumer prices rose an annual 0.4 per cent in the June quarter, the seventh quarter below the target band. Traders are pricing in a 74 per cent chance of a quarter-point cut in the OCR to 1.75 per cent in November, up from 56 per cent just before Thursday's OCR review.

"The kiwi has traded poorly since the RBNZ's freshened signal that it is likely to cut in November, but a quieter local calendar and likely softer USD should help it steady above 72 US cents," said Westpac senior market strategist Imre Speizer.

By year-end there was "a case for a correction towards 70 cents if the Fed tightens in December as we expect".

On Monday morning, the kiwi decreased to 4.8287 Chinese yuan from 4.8317 yuan on Friday in New York and slipped to 64.35 euro cents from 64.50c. It dipped to 55.79 British pence from 55.84p and was little changed at 73.10 yen from 73.18 yen. The kiwi fell to 94.87 Australian cents from A94.96c.

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