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Kiwi rebounds after strong US jobs data

NZ Newswire logoNZ Newswire 5/04/2017 Jonathan Underhill

The New Zealand dollar is little changed, having fallen to a new three-week low overnight, only to bounce back when minutes of the last Federal Reserve policy meeting showed the bank wants to reduce its balance sheet, which may ease pressure to hike interest rates.

The kiwi traded at US69.73 cents as at 8am on Thursday in Wellington, having fallen as low as US69.36c after a stronger than expected US jobs survey, from US69.72c late Wednesday. The trade-weighted index was at 75.85 from 75.86.

The New Zealand dollar broadly mirrored the greenback as it see-sawed overnight. The ADP survey of US private employment showed an increase of 263,000 jobs in March, the highest since December 2014 and ahead of estimates.

The data stoked speculation the Fed will hike rates two more times this year as it has flagged but doubts returned to the market after the FOMC minutes showed most policymakers believe the Fed should start reducing its $US4.5 trillion balance sheet this year, a move that would amount to tightening monetary policy.

"Raising the fed funds rate a quarter of a point every now and then is tinkering at the edges compared to the elephant in the room that is the balance sheet," said ANZ senior economist Sharon Zollner.

"The NZD was under pressure again overnight but in the absence of a turn in risk sentiment, it's difficult to see the NZD moving down too far given still-strong domestic data and improving export prices."

With little in the way of domestic economic releases scheduled, the kiwi dollar is likely to continue to be driven by offshore events.

On Thursday morning, the kiwi traded at 92.03 Australian cents from A92.07c late Wednesday. It traded at 77.09 yen from 77.10 yen and rose to 4.8023 yuan from 4.7971 yuan. It was little changed at 65.26 euro cents from 65.27c and slipped to 55.76 British pence from 55.98p.

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