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NZ dollar falls as greenback surges

NZ NewswireNZ Newswire 17/11/2016 Jonathan Underhill

The New Zealand dollar fell against a resurgent greenback after Federal Reserve chair Janet Yellen said the case has grown for a hike in US interest rates.

The local currency fell to 70.24 US cents as at 8am in Wellington, having earlier dipped as low as 70.09 cents, from 70.98 cents late on Thursday. The trade-weighted index fell to 77.14 from 77.62.

In prepared remarks for Congress's Joint Economic Committee, Ms Yellen said that at the Fed's policy meeting this month it "judged that the case for an increase in the target range had continued to strengthen" and such a move could be appropriate "relatively soon" dependent on incoming data.

The kiwi rose from its overnight lows after Fonterra announced an increase in its farmgate milk payout after recent gains in dairy prices.

"Fed Chair Yellen helped cement market expectations for a December rate hike," said Westpac's Imre Speizer.

"That caused the AUD and NZD to fall, despite risk sentiment remaining healthy."

Mr Speizer said Fed funds futures now implying almost a 100 per cent chance of a rate hike in December and "are also pricing one rate hike during each of the next three years".

Meanwhile, Fonterra raised its forecast milk payout to $6.00 per kilogram of milk solids saying ingredient sales were strong despite an unprecedented decrease in milk collection and it was also enjoying a strong performance and continued volume growth in consumer and food service products.

The US dollar index rose to its highest level since 2003 and equity markets gained in Europe and the US after Ms Yellen's testimony.

The kiwi traded at 77.22 yen down from 77.33 yen, it fell to 4.8345 yuan from 4.8764 yuan, declined to 56.58 British pence from 57.09 pence, slipped to 66.13 euro cents from 66.35 cents and traded at 94.85 Australian cents from 94.92 cents.

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