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NZ dollar gains after US rate hike warning

NZ NewswireNZ Newswire 12/09/2016 Paul McBeth

The New Zealand dollar gained after Federal Reserve governor Lael Brainard warned against hiking interest rates too early, citing tepid inflation and a slack labour market, which cooled speculation the US central bank may be poised to tighten.

The kiwi rose to 73.50 US cents at 8am in Wellington from 73.17 cents on Monday. The trade-weighted index advanced to 78.14 from 77.93.

Investors had been re-thinking the chances of the Fed moving as early as next week after a series of central bank officials appeared to favour such a move.

"Quite why the market was getting so beared up is beyond us - as Brainard points out, US inflation remains 'noticeably below our 2 per cent target', and there is 'greater slack than previously anticipated, in the jobs market," ANZ Bank's David Croy said.

"The NZD has regained some of its poise of late, and looks set to continue grinding higher as expectations of a Fed rate hike fade and markets focus on what is set to be some compelling local data this week."

New Zealand's currency has been buoyed by stronger than expected economic data and a recovery in global dairy prices, adding to an already compelling story for investors who have been buying the kiwi to benefit from the country's relatively high interest rates.

Government figures on Tuesday will give an indication of where inflation is tracking with August food prices, ahead of the June quarter balance of payments on Wednesday and gross domestic product on Thursday.

The local currency was little changed at 97.13 Australian cents from 97.09 cents, gained to 4.9083 Chinese yuan from 4.8857 yuan, rose to 65.42 euro cents from 65.07 cents, was little changed at 55.09 British pence from 55.12 pence. and slipped to 74.81 yen from 75.03 yen.

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