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NZ dollar falls as greenback surges

NZ NewswireNZ Newswire 18/05/2016 Tina Morrison

The New Zealand dollar fell as the US dollar surged after the Federal Reserve minutes to its last meeting stoked speculation for an interest rate hike next month.

The kiwi sank to 67.31 US cents at 8am in Wellington, from 67.90 cents at 5pm on Wednesday. The trade-weighted index declined to 72.46 from 72.79.

The US dollar index, which measures the greenback against a basket of currencies, jumped to its highest in five weeks after the release at 6am New Zealand time of the Fed minutes from its April policy meeting.

It showed the central bank is more likely to raise interest rates next month than traders had thought.

The minutes said a June hike was likely if second-quarter growth, inflation and labour data improved.

Traders increased their bets for a June rate hike to 34 per cent, up from 19 per cent earlier in the day.

"The minutes were more hawkish than most had expected," BNZ's Kymberly Martin said. "Many currencies were fairly range-bound overnight, ahead of the release. Subsequently, all have plunged as the US dollar index surged."

The exception is the British pound, which strengthened after a poll on the upcoming referendum on EU membership had tipped in favour of the 'remain' camp, where support grew to 55 per cent.

In New Zealand, the ANZ-Roy Morgan consumer confidence survey is published while later traders will be looking for further clues on the US interest rate outlook in speeches from senior banking officials.

The New Zealand dollar dropped to 46.13 British pence from 47.02 pence, fell to 4.4001 yuan from 4.4352 yuan, and slid to 60 euro cents from 60.16 cents. It advanced to 74.19 yen from 74.02 yen, and was little changed at 93.14 Australian cents from 93.17 cents.

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