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NZ dollar heads for 0.7% weekly decline

NZ Newswire logoNZ Newswire 14/10/2016 Paul McBeth

NZ dollar heads for 0.7% weekly decline © MJ_Prototype/istock/Getty Images NZ dollar heads for 0.7% weekly decline The New Zealand dollar is heading for a 0.7 per cent fall against the greenback this week as the Reserve Bank reminded investors it plans to cut interest rates again, while the Federal Reserve is looking more likely to raise rates in the US.

The kiwi fell to 71.05 US cents at 5pm in Wellington from 71.58 cents on Friday in New York last week. It was up from 70.57 cents on Thursday.

The New Zealand currency hit a 10-month low on the diverging rate track between the US and New Zealand in a week where there was little local data to drive markets.

The greenback has been rallying on mounting speculation the Fed will raise rates in December, while RBNZ assistant governor John McDermott this week reiterated the bank's position that it will cut the official cash rate again.

Next week's local inflation data will be key to the RBNZ's thinking and is expected to remain below the central bank's target band.

"They've portrayed that pretty clearly and it would be a major let down to back away from that," said Mark Johnson, senior dealer foreign exchange at OMF in Wellington.

The kiwi has support at 70.50 US cents and resistance at 71.30 cents, with all eyes on next week's September consumers price index data, Johnson said.

The trade-weighted index little changed at 76.42 from 76.35 last week, bolstered by the slumping British pound on the prospect of a hard Brexit and as a rampant greenback weighed on the euro.

The kiwi advanced to 58.08 British pence from 57.88 pence on Thursday, and is heading for a 0.9 per cent gain, while it increased to 64.39 euro cents from 63.99 cents and is heading for a 0.8 per cent rise.

New Zealand's two-year swap rate increased three basis points to 2.03 per cent, and 10-year swaps advanced two basis points to 2.59 per cent.

The kiwi traded at 93.63 Australian cents from 93.61 cents and gained to 73.88 yen from 73.25 yen. It rose to 4.7778 Chinese yuan from 4.7444 yuan as weaker than expected trade figures and signs of inflation weighed on China's currency.

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