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NZ dollar heads for gain in third quarter

NZ NewswireNZ Newswire 30/09/2016 Paul McBeth

© Bloomberg The New Zealand dollar is heading for a 1.9 per cent gain against the greenback this quarter as the country's relatively high interest rates and strong economic outlook continue to attract investors, though concerns about global banks are tempering appetite for risk-sensitive assets.

The kiwi rose to 72.64 US cents at 5pm in Wellington from 71.30 cents at the start of the quarter. It was little changed from 72.56 cents at 8am and down from 72.90 cents on Thursday.

The trade-weighted index is heading for a 1.7 per cent quarterly gain to 77.17. The TWI was little changed from 77.26.

New Zealand's currency has been a beneficiary of major central banks running near-zero interest rate policies, making the relatively high local rates on offer attractive to international investors.

A strong domestic economy and recovering global dairy prices have supported that demand, through investors are becoming wary that the Reserve Bank of New Zealand will lower the official cash rate later this year.

"The kiwi's going to be supported on dips because of the yield and that it's seen as a safe haven" compared to the political risks facing Europe and North America, said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland.

New Zealand's two-year swap rate fell two basis points to 1.96 per cent, and was down 26 basis points in the quarter, while 10-year swaps dropped five basis points to 2.4 per cent, falling 25 basis points in the quarter, reflecting the one quarter-point cut made by the Reserve Bank in August.

The kiwi increased to 95.15 Australian cents from 94.75 cents on Thursday and fell to 4.8415 Chinese yuan from 4.8658 yuan. It declined to 73.63 yen from 73.95 yen and dropped 64.74 euro cents from 65 cents. It was little changed at 55.99 British pence from 56.02 pence.

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