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NZ dollar gains on outlook for economy

NZ Newswire logoNZ Newswire 30/01/2017 Jonathan Underhill
New Zealand coin is arranged for a photograph in Wellington, New Zealand © Mark Coote New Zealand coin is arranged for a photograph in Wellington, New Zealand

The New Zealand dollar rose as optimism about the outlook for the domestic economy boosted the kiwi while markets tried to assess the implications of US President Donald Trump's executive orders such as a halt to some inbound migrants.

The kiwi traded at 72.82 US cents as at 8am in Wellington from 72.65 cents late on Monday. The trade-weighted index rose to 79.65 from 79.46.

The kiwi has now traded above 72 US cents for a week and has been helped by expectations the Reserve Bank will begin raising interest rates this year, especially since data last week confirmed inflation was back within its target band.

The greenback fell against the yen and US stock benchmarks declined as US investors reacted to Trump's temporary ban on travellers from seven Muslim-majority countries at the weekend.

"It was another night where the NZD performed well against the USD and on crosses," ANZ's Philip Borkin said.

"It is hard to see that changing dramatically any time soon given New Zealand's strong domestic picture. It is still unclear how a more isolationist US could affect markets. And then there is the issue that on any given day a Tweet or executive order could derail well-thought out plans. It does appear as though markets are increasingly reflecting that unease."

Traders will be watching for migration figures for December for any signs that the record inbound flow is abating and labour market data on Wednesday which may show the jobless rate held below 5 per cent.

The Federal Open Market Committee isn't expected to change US interest rates at the end of its two-day meeting but may give an indication of its timing for a hike. US payrolls figures for January round out the week, with the world's biggest economy forecast to have added 168,000 jobs this month, up from 156,000 the previous month.

The kiwi rose to 96.41 Australian cents from 96.16 cents, lifted to 5.0063 yuan from 4.9974 yuan, gained to 68.09 euro cents from 67.70 cents, jumped to 58.35 British pence from 57.76 pence and fell to 82.76 yen from 83.14 yen.

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