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NZ dollar market awaits auction, speech

NZN 16/01/2017 Jonathan Underhill

The New Zealand dollar was little changed in the run-up to a dairy auction and a Brexit speech by UK Prime Minister Theresa May.

The Kiwi traded at 71.14 US cents as at 5pm, from 70.89 cents on Monday. The Kiwi dollar traded at 59.00 British pence from 58.98 pence.

OMF senior dealer Mark Johnson said there has been "selling across the curve for whole milk powder contracts", which trade on the NZX.

Futures were pointing to a 2 per cent gain in tonight's auction at the start of the day but had since retreated "closer to flat", he said.

"That could be partially weighing on the Kiwi," Mr Johnson said.

More broadly, currency markets are in a holding pattern before May's Brexit statement, which is seen as a big-event risk, given her intent is to quit the EU and regain control of Britain's borders and laws.

"But it's a big unknown how things could unravel."

Ms May is scheduled to deliver a speech on Tuesday in the UK which the Sunday Times reported will spell out her commitment to leaving the EU, a move that many economists say will hurt the UK economy.

As well as the speech and the dairy auction, this week Federal Reserve chair Janet Yellen is scheduled to speak at the Davos economic summit, the European Central Bank releases its latest policy review and Donald Trump is to be inaugurated as president on Friday in the US.

Mr Trump's blunt comments on his Twitter feed have left financial markets confused about his policy intentions, whether they can be achieved and over what time, Mr Johnson said.

The trade-weighted index rose to 78.35 from 78.07. The Kiwi traded at 95.07 Australian cents from 94.86 cents on Monday. It rose to 4.9104 yuan from 4.8882 yuan and traded at 66.97 euro cents from 66.80 cents. The Kiwi rose to 81.13 yen from 80.92 yen.

New Zealand's two-year swap rate rose 3 basis points to 2.38 per cent.

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