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Kiwi passes US70c on US rate doubts

NZ Newswire logoNZ Newswire 5/01/2017 Paul McBeth

The New Zealand dollar has climbed above US70 cents for the first time in three weeks as Chinese authorities looked to curb capital outflows and US Federal Reserve policy review minutes raised uncertainty about the path of interest rates.

The kiwi rose to US70.24c as at 8am on Friday in Wellington from US69.89c on Thursday. The trade-weighted index was little changed at 77.61 from 77.59.

China's yuan posted its biggest gain against the world's reserve currency as the Chinese government attempted to slow the flow of capital out of Asia's largest economy, causing widespread selling of the greenback on Thursday.

That added momentum to a drop in the US dollar index, a measure of the greenback against a basket of currencies, as investors reassessed the outlook for Fed rate hikes.

Minutes to last month's policy meeting showed officials were unsure what level of stimulus president-elect Donald Trump's spending programme and tax reform would inject into the world's biggest economy.

"The Chinese government have been trying to stem the flow and the latest moves made it incredibly expensive to hold short positions in the yuan, so we've just seen a rash of positioning: the yuan surged, the US dollar sinks and everything else goes up against the US dollar," said OMF's Stuart Ive.

"The kiwi's move to the upside looks a little exhausted, and I wouldn't be surprised to see it consolidate into the end of the week."

Investors will be watching US non-farm payrolls on Friday in Washington, which are expected to show the US economy added about 175,000 jobs last month.

On Friday morning in Wellington the kiwi edged lower to 95.62 Australian cents from A96.81c on Thursday and declined to 81.18 yen from 81.38 yen. It fell to 56.33 British pence from 56.70p and was little changed at 66.30 euro cents from 66.42c. The kiwi slipped to 4.8374 yuan from 4.8406 yuan.

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