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NZ dollar gains rate cut prospect eases

NZ NewswireNZ Newswire 2/06/2016 Jonathan Underhill

NZ dollar gains rate cut prospect eases © Mark Tantrum/Getty Images NZ dollar gains rate cut prospect eases The New Zealand dollar rose on speculation the Reserve Bank will refrain from cutting interest rates next week and may even leave the market with the sense that the easing cycle has ended, given the domestic economy is in reasonable heart.

The kiwi rose to 68.18 US cents as at 5pm in Wellington, from 67.84 cents on Wednesday. The trade-weighted index rose to 73.47 from 73.21.

Diminishing expectations of an RBNZ rate cut are coinciding with a slightly weaker US dollar after a strong performance for the greenback in the past month and a half.

US data due out this week may do nothing to revive the US dollar, with non-farm payrolls for May expected to rise by about 160,000, weaker than the trend for the previous three months of about 200,000.

Traders will get an early heads up on the US labour market with the release of the private sector ADP report overnight.

"The two big drivers have been a slightly weaker US dollar and concerns the Reserve Bank might unwittingly ignite another kiwi dollar rally next week," said Imre Speizer, a currency strategist at Westpac.

A weak US payrolls number means the Federal Reserve wouldn't be encouraged to raise interest rates this month, one of the variables that have helped the greenback in its recent rally, he said.

Ahead of the RBNZ's monetary policy statement next week, the Reserve Bank of Australia is due to review interest rates, although Speizer expects it will keep the cash rate on hold at 1.75 per cent while signalling a cut is still possible.

The kiwi didn't move much after dairy product prices rose 3.4 per cent in the GlobalDairyTrade auction overnight.

It fell to 74.42 yen from 74.95 yen on Wednesday, rose to 94.12 Australian cents from 93.24 cents, increased to 47.23 British pence from 46.83 pence, and was little changed at 60.86 euro cents from 60.98 cents. It rose to 4.4859 yuan from 4.4734 yuan.

The two-year swap rate fell 2 basis points to 2.27 per cent and the 10-year swaps fell 6 points to 2.87 per cent.

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