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NZ dollar extends gain against Aussie

NZ Newswire logoNZ Newswire 22/03/2017 Rebecca Howard
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The New Zealand dollar gained against the Australian dollar on Wednesday as the interest rate differential between the countries looks set to persist and as investors were unnerved by the US White House's inability to deliver on its plans.

The kiwi traded at A91.78c as at 5pm in Wellington, versus 91.40c as at 8am and 91.37c on Tuesday. It was at US70.30c from 70.47c.

Stocks across Asia fell, following Wall Street's lead, as optimism about US President Donald Trump's ability to overhaul tax policy waned.

"We had a slightly risk off scenario overnight with the equity markets falling and that's followed through in Asia as markets become a little bit nervous around the ability of the Trump administration to deliver its policies," said OMF private client advisor Stuart Ive.

Among other things, it looks like Trump's bid to amend the Affordable Healthcare Act, known as Obamacare, freeing up funds for the White House to embark on tax reform may be "somewhat floundering", said Mr Ive.

Meanwhile, the kiwi continued to outperform against the Aussie after the RBA signalled its "pretty much on the fence" at 1.5 per cent as they try and balance their economy, between the over-heated housing market, high debt levels and low inflation, said Mr Ive.

With New Zealand's Reserve Bank expected to keep the official cash rate at 1.75 per cent when it reviews policy on Thursday, that means the rate differential will stay in the kiwi's favour.

The better-than-expected overnight milk auction may have also helped support the local currency.

Whole milk powder prices rose 2.9 per cent to US$2,855 a tonne at the GlobalDairyTrade auction. Analysts had been expecting a decline based on pricing in the futures market.

The kiwi fell to 78.48 yen from 79.45 yen and dropped to 4.8394 Chinese yuan from 4.8673 yuan. It declined to 65.11 euro cents from 65.51 cents and decreased to 56.36 British pence from 56.98 pence.

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