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NZ dollar gains after RBNZ fails to act

NZ NewswireNZ Newswire 11/05/2016 Tina Morrison

The New Zealand dollar gained after the Reserve Bank failed to add any new measures to curb housing market strength, prompting a pull-back in bets for lower interest rates.

The kiwi rose to 68.24 cents at 8am in Wellington, from 67.92 cents at 5pm on Wednesday. The trade-weighted index advanced to 72.68 from 72.49.

The local currency jumped 1 per cent since the bank published its six-monthly financial stability report, saying it was closely monitoring developments in the housing market but didn't detail plans for new measures.

That disappointed some traders who had interpreted comments by Finance Minister Bill English the previous day as a signal that the Reserve Bank would announce further housing market restrictions.

They anticipated that would free up Governor Graeme Wheeler to reduce interest rates further.

"We saw the spike up in the New Zealand dollar as an unwinding of that selling," BNZ currency strategist Jason Wong said.

"The New Zealand dollar would have likely risen even further had the bank not indicated that further macro-prudential measures were in its sights, although it was an open-ended suggestion with no timetable in mind."

Broad US dollar weakness and a lift in oil had also bolstered the kiwi, Mr Wong said.

Traders will be closely watching a pre-Budget speech by Bill English to a Wellington Chamber of Commerce lunch and data on food prices and the BNZ-BusinessNZ Performance of Manufacturing Index are also due out.

The New Zealand dollar rose to 92.50 Australian cents from 92.38 cents, gained to 47.24 British pence from 47.01 pence, advanced to 74.01 yen from 73.88 yen, increased to 4.4295 yuan from 4.4235 yuan, and edged up to 59.72 euro cents from 59.67 cents.

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