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NZ dollar follows Aussie lower

NZN 4/04/2017 Paul McBeth

The New Zealand dollar followed the Australian dollar lower against the greenback on Tuesday after the Reserve Bank of Australia warned the nation's weak wage growth was set to stay subdued.

The kiwi fell to US69.87c as at 5pm in Wellington from 69.92c immediately before the RBA announcement. The local currency rose to A92.13c from 91.90c before the statement and 92.02c on Monday.

The RBA kept its target cash rate unchanged at 1.5 per cent, saying inflation was still "quite low" and while the headline figure would rise to 2 per cent through the course of the year, "underlying inflation is expected to be a bit more gradual with growth in labour costs remaining subdued". Governor Philip Lowe said.

The RBA still expects to see growth in employment even though the labour market had been tepid to date.

"There was obviously a dovish shift in the commentary that caused a sell-off in the Aussie," said Imre Speizer, senior market strategist at Westpac.

"The kiwi went along for the ride in sympathy."

Local data showed New Zealand firms grew less optimistic about the country's economic conditions, even as their own activity remained relatively robust.

The GlobalDairyTrade auction overnight will be watched, although pricing in NZX dairy futures indicate there won't be much of a change at the event.

The kiwi dropped to 77.14 yen from 77.97 yen on Monday and fell to 4.8086 Chinese yuan from 4.8210 yuan. It was little changed at 65.45 euro cents from 65.56 cents and rose to 56.01 British pence from 55.84 pence.

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