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NZ dollar heads for weekly decline

NZ Newswire logoNZ Newswire 16/12/2016 Paul McBeth

The New Zealand dollar is heading for a 1.4 per cent decline this week as the US Federal Reserve's track for higher US interest rates pushed the greenback to its highest level in 14 years.

The kiwi dropped to 70.27 US cents at 5pm in Wellington from 71.30 cents on Friday last week in New York, and down from 71 cents on Thursday. The trade-weighted index is heading for a 0.9 per cent decline, at 78.05 from 78.72 last week, and down from 78.55 on Thursday.

The US dollar index, a measure of the greenback against a basket of currencies, rose as high as 103.512, the highest since December 2002, after the Fed raised the target federal funds rate a quarter-point as expected, and signalled a more aggressive hiking cycle in 2017 than anticipated.

The Fed's move boosted the greenback, which was already benefiting from increased demand when the election of Donald Trump in the presidential race drove up yields on US Treasuries on the prospect of looser fiscal policy.

"The US dollar is looking quite bullish on the daily charts, but that's yield-driven - it's definitely going to be interesting next year," said Tim Kelleher, head of institutional foreign exchange sales at ASB Institutional in Auckland.

"The kiwi does look weak on the charts, but every time it's at the bottom of the range it looks weak - it should be a buy on dips."

New Zealand's two-year swap rate rose two basis points to 2.36 per cent, and 10-year swaps were up three basis points to 3.57 per cent.

The kiwi fell to 95.41 Australian cents from 95.70 cents on Thursday, extending a decline after data across the Tasman showed Australia added more jobs last month than expected.

The local currency fell to 4.8810 Chinese yuan from 4.9283 yuan on Thursday, and declined to 83.02 yen from 83.39 yen. It slipped to 67.36 euro cents from 67.70 cents, and was little changed at 56.62 British pence from 56.67 pence.

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