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NZ dollar gains from 11-month low

NZN 5/05/2017 Paul McBeth

The New Zealand dollar gained from an 11-month low as rising inflation expectations halted the downward pressure on the kiwi, that it's been sharing with other currencies sensitive to falling commodity prices.

The kiwi rose to US68.62c as at 5pm in Wellington from an 11-month low of 68.36c, and though still down from 68.82c Thursday. The trade-weighted index decreased to 74.78 from 74.95.

Respondents to the Reserve Bank of New Zealand's survey of expectations see the pace of inflation at 2.17 per cent two years from now, up from a pace of 1.92 per cent in the March quarter.

The central bank watches the survey closely to see how firms are responding to economic data, with particular scrutiny on long-term inflation expectations.

Governor Graeme Wheeler is set to review monetary policy next week and is expected to keep the official cash rate at 1.75 per cent.

"The RBNZ does look closely at that figure on the basis that inflation expectations beget inflation outcomes," said Graham Parlane, private client manager at OMF.

"The fact it's over that fulcrum over that midpoint garnered some attention so we saw the kiwi jump up."

The kiwi has found itself under pressure for much of this week as weaker iron ore and oil prices weighed on commodity-sensitive currencies, even as prices raw materials produced in New Zealand rose.

The local currency rose to A92.99c from 92.75c.

The kiwi fell to 62.47 euro cents from 63.11 cents ahead of the run-off vote in the French presidential election, where centrist Emmanuel Macron is expected to beat National Front candidate Marine Le Pen.

The local currency declined to 53.12 British pence from 53.39 pence Thursday, and fell to 4.7317 Chinese yuan from 4.7403 yuan. It dropped to 77 yen from 77.60 yen.

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