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Kiwi slides as US flags rate hikes

NZ Newswire logoNZ Newswire 15/12/2016 Jonathan Underhill

The New Zealand dollar has extended its decline after this week's US Federal Reserve decision to hike interest rates and project further increases in 2017.

The kiwi dollar dropped to US70.36 cents as at 8am on Friday in Wellington from US71c late on Thursday. The trade-weighted index fell to 78.13 from 78.55.

The Fed this week raised the target federal funds rate by 25 basis points to between 0.50 per cent and 0.75 per cent, as expected, but also signalled three further increases in 2017 when the market was expecting two.

The US dollar index rose to 103.512, the highest since December 2002 after the Fed statement drove Treasury yields higher.

The Fed's "less dovish projections immediately catapulted the USD higher, yesterday morning. The upward momentum was maintained last night. All of its peers suffered," said BNZ senior market strategist Kymberly Martin.

On Friday morning, the kiwi fell to 95.51 Australian cents from A95.70c following the release on Thursday of Australian labour market data which showed employment rose by 39,100 in November, more than twice the 17,500 expected by economists.

The kiwi fell to 4.8830 yuan from 4.9283 yuan late on Thursday. It slipped to 67.46 euro cents from 67.60c, fell to 56.54 British pence from 56.67p and declined to 82.96 yen from 83.39 yen.

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