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NZ dollar falls before rate review

NZ NewswireNZ Newswire 27/04/2016 Jonathan Underhill

The New Zealand dollar fell as the Federal Reserve kept US interest rates unchanged and dropped a reference to global risks, suggesting it still intends to hike while the Reserve Bank is more inclined to cut borrowing costs.

The kiwi fell to 68.38 US cents as at 7.30am in Wellington, from 68.81 cents late on Wednesday. The trade-weighted index fell to 72.41 from 72.67.

The Federal Open Market Committee kept the target range for its overnight lending rate at 0.25 per cent to 0.5 per cent, saying it remained confident inflation would rise to its 2 per cent target over the medium term.

It dropped a reference from its previous statement about global economic and financial risks but added it was closely monitoring offshore developments.

The Reserve Bank reviews the official cash rate on Thursday morning with the market expecting the bank to keep the official cash rate at 2.25 per cent now and cut in June.

"Overall, there were subtle changes here and there to the Fed's statement, but nothing really to change the policy outlook - the next move being data dependent," said BNZ's Jason Wong.

In New Zealand, the market had been confused by recent Reserve Bank communications, he said.

"The policy of a cut or on-hold decision could easily go either way."

The kiwi rose to 90.30 Australian cents, having gained from 90.12 cents after weak Australian inflation revived talk of a rate cut across the Tasman.

The New Zealand dollar slipped to 47.07 British pence from 47.16 pence, dropped to 60.48 euro cents from 60.83 cents, fell to 76.27 yen from 76.37 yen and slipped to 4.4399 yuan from 4.4628 yuan.

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