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Kiwi stays low as OCR cut expected

NZ NewswireNZ Newswire 19/07/2016 Jonathan Underhill

The New Zealand dollar is little changed near its lowest levels in almost a month on speculation the Reserve Bank will have a clear run at cutting interest rates.

The kiwi traded at US70.50 cents at 8am on Wednesday in Wellington, from US70.27c late on Tuesday when it tumbled following the Reserve Bank's announcement of further measures to cool the housing market.

The trade-weighted index slipped to 75.65 from 75.74.

The kiwi dropped on Tuesday and swap rates fell to record lows on the ban's latest plan to prevent an overheated housing market becoming a financial stability risk.

It is due to give an economic update on Thursday, which is expected to signal its disquiet with a currency that's well above its projections on a trade-weighted index basis, constraining import prices and making it harder to return inflation to within its target range.

Traders are betting on a second cut to the official cash rate after one pencilled in for August.

The RBNZ's proposed new loan-to-value restrictions "have added to the market's conviction that further OCR cuts are coming in August and beyond," ANZ agri economist Con Williams said in a note.

"Dairy prices still range trading, which will place pressure on opening milk price forecasts from May."

Dairy product prices were mixed at the latest GlobalDairyTrade auction as a gain in whole milk powder offset a decline for most other products.

On Wednesday morning, the kiwi rose to 93.87 Australian cents from A93.35c on Tuesday.

It slipped to 74.73 yen from 74.80 yen and dropped to 4.7166 Chinese yuan from 4.7488 yuan.

It rose to 53.81 British pence from 53.57p and decreased to 63.96 euro cents from 64.08c.

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