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NZ dollar gains ahead of rate review

NZ NewswireNZ Newswire 26/04/2016 Jonathan Underhill

The New Zealand dollar has gained with traders and economists divided on whether Reserve Bank governor Graeme Wheeler will cut interest rates on Thursday.

The kiwi rose to 68.89 US cents as at 8am in Wellington from 68.57 cents late on Tuesday. The trade-weighted index was almost unchanged at 72.60 from 72.59.

The Federal Open Market Committee are expected to make a somewhat hawkish statement on Thursday ahead of the Reserve Bank's review of the official cash rate.

Traders say Mr Wheeler will cut the rate to 2 per cent either on Thursday or at the full June 10 monetary policy statement.

He needs to encourage annual inflation back into the bank's 1 per cent-to-3 per cent band, which it has been below since the third quarter of 2014. Based on the bank's March projections, inflation will accelerate to 1.1 per cent in calendar 2016.

"Trading should be light ahead of tomorrow morning's doubleheader with the FOMC and RBNZ statements out within a few hours of each other," said BNZ's Jason Wong. "The combination of a slightly more hawkish Fed and an RBNZ easing would help take the NZD below 68 (US cents)."

The kiwi fell to 47.28 British pence from 47.41 British pence and was little changed at 61.01 euro cents from 61.04 cents. The local currency rose to 76.70 yen from 76.35 yen, declined to 88.85 Australian cents from 89.11 cents and gained to 4.4707 yuan from 4.4656 yuan.

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