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NZ dollar finishes week on a high

NZ NewswireNZ Newswire 3/06/2016 Paul McBeth
New Zealand coin is arranged for a photograph in Wellington, New Zealand © Mark Coote New Zealand coin is arranged for a photograph in Wellington, New Zealand

The New Zealand dollar is heading for a 2.1 per cent weekly gain against the greenback as traders dial back their expectations for another rate cut by the Reserve Bank.

The kiwi rose to 68.29 US cents at 5pm in Wellington from 66.91 cents on Friday in New York last week. It was up from 67.98 cents at 8am and 68.15 cents on Thursday. The trade-weighted index advanced to 73.62 from 73.45 and is heading for a 1.5 per cent gain over the week.

New Zealand's Reserve Bank is expected to keep the official cash rate at 2.25 per cent next week with the growing prospect of a hike by the US Federal Reserve and more robust economic data seen as reducing the need for another cut.

"On one hand, people think there's more scope for higher interest rates in the US, but on the other, the chance of interest rate cuts in New Zealand is looking less likely," said Phil Borkin, senior economist at ANZ.

Government figures on Friday showed the volume of building activity rose 5.5 per cent in the March quarter, underpinned by a large pipeline of work in Auckland. Separate data showed Auckland house prices were stabilising, while another survey showed local commodity prices rose in May.

Traders will be watching US jobs data in New York for another gauge on the world's biggest economy before Fed chair Janet Yellen delivers a speech to the World Affairs Council in Philadelphia on Monday about the economic outlook and monetary policy.

Australia's Reserve Bank will review policy on Tuesday next week followed by New Zealand's central bank on Thursday.

The local currency rose to 94.37 Australian cents from 94.10 cents on Thursday, and increased to 4.4957 Chinese yuan from 4.4829 yuan. It decreased to 74.18 yen from 74.39 yen, and gained to 61.23 euro cents from 60.81 cents. The kiwi increased to 47.38 British pence from 47.18 pence.

New Zealand's two-year swap rate was unchanged at 2.27 per cent, and 10-year swaps fell three basis points to 2.84 per cent.

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