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Kiwi slips as US rate hike talked up

NZ NewswireNZ Newswire 21/08/2016 Jonathan Underhill

The New Zealand dollar has fallen after San Francisco Federal Reserve president John Williams revived talk of a rate hike as soon as September, taking a little of the shine off the kiwi's high yield.

The kiwi fell to US72.45 cents at 8am on Monday in Wellington, from US72.68c in late New York trading on Friday. The trade-weighted index fell to 76.82 from 77.05.

Mr Williams, a non-voting Fed member, says the US economy has "good momentum" and it makes sense to return to gradual increases, "preferably sooner rather than later."

With little local data scheduled, the market will likely take its lead from the US in the run-up to a speech by Fed chair Janet Yellen at the Jackson Hole symposium next weekend, where she may give a clearer steer on the timing of rate hikes.

Currently, the market is betting on a December hike in the US and a quarter-point cut by the Reserve Bank before that.

"The RBNZ's easing cycle combined with the Fed tightening in December should push the NZD lower towards 70 US cents by year end," said Westpac senior market strategist Imre Speizer.

Still, recent easing by the Bank of England and Bank of Japan "have made the NZD even more attractive to global investment flows such that a break above 74 US cents is possible first".

On Monday morning, the kiwi rose to 95.25 Australian cents from A94.56c on Friday in New York. It slipped to 4.8197 yuan from 4.8336 yuan and fell to 64.06 euro cents from 64.18 cents. The local currency was little changed at 55.56 British pence from 55.58p and rose to 73.04 yen from 72.77 yen.

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