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Kiwi recovers from Yellen rate hike talk

NZ Newswire logoNZ Newswire 15/02/2017 Rebecca Howard

© Bloomberg The New Zealand dollar was little changed, recovering from an earlier decline as the country's robust economic outlook trumped heightened expectations for an early US rate hike following comments by Federal Reserve chair Janet Yellen.

The kiwi was trading at United States 71.73 cents as at 5pm on Wednesday versus US71.55c as at 8am and US71.75c on Tuesday. The trade-weighted index was at 78.11 from 78.17.

"It was just really a grind higher after a weaker night," said ANZ Bank New Zealand senior economist Philip Borkin. The kiwi fell overnight after Ms Yellen basically left March "on the table" for a possible rate hike, said Mr Borkin.

The US dollar will remain a key driver, but "it's hard to paint a very bearish picture for the New Zealand dollar at the moment" given the strong economic backdrop in New Zealand, he said. Recent data, such as this week's food price figures and retail card spending point to inflationary pressure while migration, tourism and other numbers remain strong.

Bank of New Zealand currency strategist Jason Wong said global forces also remain supportive for the New Zealand dollar. "Global growth momentum is improving and world output is on track to record its strongest growth in five years; global commodity prices are recording strong gains," said Mr Wong. Given that the global conditions "aren't likely to diminish overnight" the New Zealand dollar will remain a "strong currency," he said.

The kiwi rose to 57.52 British pence from 57.24 pence and was little changed 67.74 euro cents from 67.67. It traded at 93.42 Australian cents versus A93.52c late Tuesday and gained to 81.96 yen from 81.48 yen. The kiwi slipped to 4.9233 Chinese yuan from 4.9354 yuan.

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