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NZ dollar falls on rate cut talk

NZ NewswireNZ Newswire 21/04/2016 Jonathan Underhill

NZ dollar falls on rate cut talk © Brent Lewin/Bloomberg NZ dollar falls on rate cut talk The New Zealand dollar fell from a 10-month high against the greenback and dropped versus the Australian dollar amid speculation the Reserve Bank may try to drive the kiwi lower by cutting rates next week.

The kiwi traded at 69.72 US cents at 5pm in Wellington from 70.08 cents late on Wednesday, when it touched a 10-month high of 70.54 cents. The local currency fell to 89.27 Australian cents from 90.01 cents.

There is currently a 41 per cent chance that Governor Graeme Wheeler will cut the official cash rate to 2 per cent at the April 28 review, based on the overnight interest swap curve.

Bets have swung between a cut and no cut in recent days but are currently in favour of a June 9 cut, when the bank releases its monetary policy statement.

"A few players are coming around to the thought that with the kiwi up here the RBNZ will try to surprise the market and go next week, and try to get the kiwi a little bit lower," said NZForex's Alex Hill.

"If they want to have the currency affected the best thing would be to catch the market on the hop."

The New Zealand dollar has strengthened more than the Reserve Bank expected in its most recent projections.

Ahead of next week's interest rate review, traders will be watching for the European Central Bank's policy review overnight. The kiwi didn't move much after figures showed net inbound migration rose to a new record of 67,600 in the 12 months through March 31 or after the ANZ-Roy Morgan consumer confidence index rose in April.

The kiwi was little changed at 61.68 euro cents and slipped to 48.60 British pence from 48.78 pence, it fell to 4.5102 yuan from 4.5296 yuan and was little changed at 76.37 yen.

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