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NZ dollar falls as risk sentiment falters

NZ NewswireNZ Newswire 18/05/2016 Jonathan Underhill

NZ dollar falls as risk sentiment falters © REUTERS/Dennis Owen/Files NZ dollar falls as risk sentiment falters The New Zealand dollar fell as global geopolitical uncertainties and stretched equity market valuations sapped risk appetite and demand for the currency of a country where interest rates are set to fall in coming months.

The kiwi fell to 67.92 US cents as at 5pm in Wellington, from 68.07 cents on Tuesday. The trade-weighted index rose to 72.81 from 72.67.

The currency was buffeted by conflicting forces overnight, with a jump in US consumer prices adding to the case for a Federal Reserve rate hike, while the increase in the price of dairy products in the GlobalDairyTrade auction was positive for the kiwi.

Fonterra is expected to give its first milk payout forecast for the 2016/2017 season after its board meeting next week, with some increase seen from this season's weak payout, while the Reserve Bank is expected to cut the official cash rate in August, if not at its June meeting.

"At the moment, the kiwi is a bit non-directional. We're seeing risk sentiment faltering a little bit and the kiwi tends to be sentiment driven," said Sheldon Slabbert, a trader at CMC Markets New Zealand.

"You've got the Brexit, US elections, recession in Japan, the migrant crisis and renewed Chinese credit fears - there's a lot of uncertainty in the market."

Brexit is the term that's been adopted to describe the British referendum on membership of the European Union, which takes place on June 23.

The kiwi didn't move much after government figures showed both producer input and output prices fell in the first quarter, underlining the picture of a domestic economy with little inflation pressure.

The New Zealand dollar gained to 93.14 Australian cents from 92.50 cents and was little changed at 47.03 British pence from 47.01 pence. It was also little changed at 60.16 euro cents from 60.14 cents. The kiwi was little changed at 74.13 yen and was little changed at 4.4366 yuan from 4.4361 yuan on Tuesday.

The two-year swap rate fell 1 basis point to 2.20 per cent and the 10-year swaps fell 2 points to 2.84 per cent.

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