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NZ dollar gains as greenback extends slide

NZ NewswireNZ Newswire 29/11/2016 Jonathan Underhill

The New Zealand dollar rose to a two-week high as the US dollar index extended its slide from the highest levels in 16 years and traders awaited the release of the Reserve Bank's stability report.

The kiwi dollar rose to 71.22 US cents as at 8am in Wellington from 70.69 cents late on Tuesday. The trade-weighted index gained to 78.22 from 77.70.

Euphoria over Donald Trump's US presidential victory drove the US dollar index to its highest levels since 2003 last week, as investors bet he will enact policies that stimulate the US economy, driving growth and inflation and keeping interest rates on a tightening bias.

The dollar rally has paused as traders question how successful Trump will be in policies such as tax cuts and massively increased spending on infrastructure. Trump's camp has even hinted that it wants to overhaul the Federal Reserve, which is expected to continue hiking interest rates after the one expected this month.

"Over the past 24 hours the USD has traded sideways," said BNZ's Kymberly Martin.

She expects the RBNZ's stability report on Wednesday will show that housing and dairy sector risks remain in focus and provide some assessment of loan-to-value restrictions for housing loans.

Traders are also awaiting a key meeting of the Organization of Petroleum Exporting Countries in Vienna on Wednesday, with prospects of lower oil prices if the group fails to agree on production cuts, weighing more broadly on commodities and so-called commodity currencies such as the Canadian, Australian and kiwi dollars.

Meanwhile, a NZ Institute of Economic Research report said the New Zealand economy is going to continue to benefit from booming tourism, migration and construction, keeping annual growth at more than 3 per cent a year.

The kiwi fell to 56.95 British pence from 57.03 pence, it gained to 95.19 Australian cents from 94.68 cents, jumped to 80.02 yen from 79.27 yen, rose to 4.9094 yuan from 4.8720 yuan and gained to 66.94 euro cents from 66.72 cents.

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