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NZ dollar gains as greenback weakens

NZ NewswireNZ Newswire 7/06/2016 Tina Morrison

The New Zealand dollar gained, hovering under 70 US cents, as traders ditch the US dollar after weak labour market data pushed out the timing of future US interest rate hikes.

The kiwi touched a month-high of 69.84 US cents overnight and was trading at 69.69 cents at 8am in Wellington, from 69.24 cents at 5pm on Tuesday. The trade-weighted index advanced to 74.12 from 73.75.

The US dollar sank after US labour market data released on Friday showed employers in the world's largest economy added just 38,000 workers in May, the lowest level since September 2010 and below the 164,000 expected by economists in a Reuters survey.

That's prompted traders to scale back their bets for imminent US interest rate hikes.

Locally, most economists expect New Zealand's Reserve Bank will keep interest rates on hold on Thursday, holding back on further cuts until later in the year, and helping underpin the kiwi for now. That sentiment has intensified after the Reserve Bank of Australia kept rates on hold on Tuesday.

"The US dollar has been on the backfoot since Friday's payrolls and that is currently persisting in the market so we've got a weak US dollar against pretty much all the currencies and kiwi is just benefiting from that," said OMF's Martin Rudings.

Mr Rudings said 14 economists expect New Zealand rates to remain on hold tomorrow, while eight expect a cut.

"The market is pricing in a 100 per cent of a chance of a cut later on in the year, about August, but at the moment if they do not go tomorrow, then the kiwi is going to remain firm against the US dollar."

The New Zealand dollar edged up 93.44 Australian cents from 93.24 cents, increased to 61.35 euro cents from 60.96 cents, gained to 47.92 British pence from 47.66 pence, rose to 74.79 yen from 74.55 yen, and lifted to 4.5793 yuan from 4.5492 yuan.

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