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NZ dollar falls on US rate hike talk

NZ NewswireNZ Newswire 29/05/2016 Jonathan Underhill

The New Zealand dollar fell after Federal Reserve chair Janet Yellen said a rate hike is "appropriate" in coming months, driving the greenback up against a basket of currencies.

The kiwi fell to 66.91 US cents as at 8am in Wellington, from 67.44 cents in late Asian trading last week. The trade-weighted index slipped to 72.29 from 72.61 in Wellington on Friday.

Ms Yellen told an audience at Harvard University that it was appropriate "for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months, such a move would be appropriate".

The comments add to the rate hike hints from other Fed officials in recent speeches, although apart from saying the June Federal Open Market Committee meeting is "live" for a rate hike, no further guidance has been given on timing.

"Yellen's comments were interpreted as slightly hawkish, corroborating the recent views of other FOMC members, albeit tempered by data-conditionality," said Westpac's Imre Speizer.

The market is pricing a 30 per cent chance of a Fed hike in June while the odds of a cut in July are at 65 per cent, Mr Speizer said.

The New Zealand dollar fell to 93.11 Australian cents from 93.33 cents in Wellington on Friday and dropped to 60.19 euro cents from 60.30 cents. It declined to 73.73 yen from 74.08 yen, fell to 4.3903 yuan from 4.4255 yuan and decreased to 45.73 British pence from 45.97 pence last week.

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