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NZ dollar climbs back above US70c

NZN 24/05/2017 Paul McBeth

The New Zealand dollar rose back above US70c as the minutes to this month's US Federal Reserve policy meeting raised uncertainty over the timing of US interest rate increases.

The kiwi climbed to US70.43c as at 8am in Wellington from US69.94c on Wednesday.

The trade-weighted index advanced to 76.15 from 75.79.

Minutes to the Federal Open Market Committee's meeting earlier this month said most members supported a hike in the federal funds rate in June provided the economic data met expectations and showed officials were planning to gradually shrink the central bank's balance sheet after years of expanding it through quantitative easing.

While a rate increase is still expected next month, the US dollar index dipped as investors wanted a clearer steer on the timing of the Fed's tightening.

"Markets did a bit of there-and-back on the release of the Fed's minutes; the USD bounced a tad but then retreated with the consensus being that markets were looking for more direct references to a June hike," ANZ Bank New Zealand chief economist Cameron Bagrie said in a note.

"The NZD has rallied hard from the 0.6880 support level, but gains above 0.70 look set to be harder fought."

Investors will be watching Thursday's New Zealand government budget which will likely show stronger Crown books with increased spending expected in health, education, infrastructure and housing.

Still, ANZ's Bagrie said he thinks the kiwi's overnight rally will fade after the budget.

The kiwi rose to 62.81 euro cents from 62.54 euro cents on Wednesday after European Central Bank president Mario Draghi played down side-effects of running negative interest rate policy, while noting underlying inflation in the region was still subdued in spite of the recent economic activity.

The local currency rose to 4.8514 Chinese yuan from 4.8196 yuan on Wednesday after Moody's Investors Service downgraded China's sovereign credit rating one notch over the nation's growing indebtedness.

The kiwi was little changed at A93.91c from A93.92c.

New Zealand's currency rose to 78.63 yen from 78.22 yen on Wednesday and climbed to 54.36 British pence from 53.89 pence.

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