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Kiwi TWI hits 17-month high

NZ NewswireNZ Newswire 7/09/2016 Jonathan Underhill

The New Zealand dollar trade-weighted index has risen above 79 for the first time in 17 months as the nation's relatively sturdy economic growth, comparative high interest rates and recovering commodity prices underpinned sentiment for the kiwi.

The kiwi rose to US74.42 cents as at 8am on Thursday in Wellington, having traded as high as US74.79c, the highest since May last year, from US74.30c late on Wednesday.

The trade-weighted index rose to 78.73 from 78.51 and reached 79.05 overnight, or about 4 per cent above the average 76 level the Reserve Bank has projected for the third quarter.

The Federal Reserve's Beige Book showed most US districts reported a "modest" or "moderate" pace of overall growth, and Bank of England Governor Mark Carney downplayed signs of strength in the UK economy while keeping the door open for further easing.

By contrast, figures have shown New Zealand manufacturing sales rose in the second quarter, turning from a decline in the first quarter, led by meat and dairy, the latest in a series of relatively sturdy data.

"The RBNZ is most concerned when NZD strength departs from weaker domestic fundamentals," said BNZ strategist Kymberly Martin.

"Currently the pick-up in the NZD can partly be justified by the recent strong pick-up in NZ's terms of trade, driven by a 45 per cent increase in NZ dairy prices."

Whole milk powder prices at the latest GlobalDairyTrade auction rose to their highest level since October, giving investors confidence New Zealand's biggest export commodity is recovering.

On Thursday morning the New Zealand dollar advanced to 55.83 British pence from 55.40p late on Wednesday. It rose to 97.03 Australian cents from A96.81c, lifted to 75.74 yen from 75.36 yen and gained to 4.9690 yuan from 4.9536 yuan. It increased to 66.25 euro cents from 66.02c.

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