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Kiwi unwinds gains on US rate hike talk

NZ Newswire logoNZ Newswire 3 days ago Paul McBeth

The New Zealand dollar has unwound most of its gains from faster-than-expected inflation as Dallas Federal Reserve president Robert Kaplan affirmed his view that the world's biggest central bank will lift rates another two times this year, stoking demand for the greenback.

The kiwi fell to US70.12 cents as at 8am on Friday in Wellington from US70.37c on Thursday. The trade-weighted index declined to 76.17 from 76.47.

The local currency jumped about a third of a US cent on Thursday after local data showed the consumer prices index rose at a faster pace than anticipated, raising the prospect the Reserve Bank may have to hike interest rates earlier than expected.

However, that rally was short-lived as comments from the Fed's Kaplan that three rate hikes this year was a "good baseline" and could be adjusted depending on the economic data added to the view that the US central bank was on track to deliver higher interest rates.

"The kiwi is back on the back foot, and only a few pips above where it was pre-CPI yesterday, thanks to USD strength overnight," ANZ senior rates strategist David Croy said in a note.

"It's difficult to argue that the kiwi should be stronger given that we expect growth to tail off this year, and as the US economy builds momentum and policy there normalises, but equally, it's difficult to be bearish given New Zealand's respectable credentials."

With no local data on Friday, investors will continue to take their cues from overseas leads.

On Friday morning, the kiwi slipped to 65.42 euro cents from 65.58c, fell to 54.70 British pence from 54.93p, slipped to 93.13 Australian cents from A93.70cand declined to 4.8243 Chinese yuan from 4.8439 yuan.

It was almost unchanged at 76.67 yen from 76.65 yen.

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