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NZ dollar holds firm at week's end

NZ NewswireNZ Newswire 12/08/2016 Jonathan Underhill

© Reuters The New Zealand dollar is ending the week little changed from last Friday with exuberance in the wake of the Reserve Bank statement having unwound.

The kiwi dollar traded at 71.94 US cents at 5pm in Wellington, down from 72.60 cents late yesterday and from 71.98 cents a week ago. The trade-weighted index fell to 76.22 from 76.83 late yesterday.

The New Zealand dollar soared as high as 73.41 US cents, a 15-month high, immediately after the monetary policy statement was published and the TWI soared to 77.28.

Governor Graeme Wheeler cut the official cash rate a quarter point to 2 per cent and said further easing was needed in a statement that should have met market expectations if not for some traders who had convinced themselves much deeper cuts were looming. Wheeler flagged his easing intentions in a July 21 economic update.

"The foreign exchange market was really handing out a pretty strong lesson that if you warn the market three weeks in advance that you're likely to cut rates, then it gives the market three weeks to build expectations and market positions," said Robert Rennie, chief currency strategist at Westpac.

"The market was pricing in the possibility of a 50 basis point cut. Now here we are 24 hours later and I think the market has reconsidered."

The New Zealand dollar didn't move much after figures showed second-quarter retail sales volumes rose at the fastest pace in close to a decade, beating economists' expectations. Retail sales increased on a seasonally and inflation-adjusted basis by 2.3 per cent in the three months through June from the March quarter, the biggest percentage increase since the December 2006 quarter, Statistics New Zealand said.

The kiwi fell to 93.56 Australian cents from 94.30 cents and dropped to 4.7775 Chinese yuan from 4.8209 yuan. It declined to 73.37 yen from 73.62 yen and fell to 55.46 British pence from 55.79 pence. The local currency fell to 64.58 euro cents from 65 cents.

New Zealand's two-year swap rate fell 1 basis point to 1.95 per cent and 10-year swaps rose 2 basis points to 2.40 per cent.

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