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NZ dollar rises as rate cut doubts emerge

NZ NewswireNZ Newswire 7/07/2016 Jonathan Underhill
<span style="font-size:13px;">The NZ dollar rises against the greenback and approaches 56 British pence after a Reserve Bank speech casts doubts on interest rate cuts.</span> © Getty Images The NZ dollar rises against the greenback and approaches 56 British pence after a Reserve Bank speech casts doubts on interest rate cuts.

The New Zealand dollar has gained after Reserve Bank deputy governor Grant Spencer flagged concerns over house prices, raising doubts the bank will cut interest rates again.

The kiwi rose to 72.24 US cents as at 8am in Wellington, up from about 71.50 cents just ahead of Mr Spencer's speech on Thursday. The trade-weighted index rose to 77.36 from 76.72. That's the highest since May last year and well above the average 71.6 level the Reserve Bank is projecting for the third quarter.

Mr Spencer said the Reserve Bank may introduce more stringent macroprudential tools before the end of the year.

It said it would be helped if the government chose to revisit the impact that tax advantages on residential housing and migration policy are having on demand.

Some traders had expected more concrete steps to be announced, mitigating the impact lower interest rates would have on the housing market and giving the central bank more confidence to cut the official cash rate next month.

"After the bank has clearly re-stated its concerns regarding NZ house price appreciation, the market may now feel less confident that the RBNZ is on the verge of another OCR cut," said BNZ's Kymberly Martin.

The kiwi advanced to 96.65 Australian cents, the highest in almost 15 months, extending Thursday's gains when Standard & Poor's lowered the outlook on Australia's credit rating to negative from stable in the wake of an inconclusive election.

The US dollar index gained after data from payroll processor ADP from the US economy added 172,000 jobs in June, beating estimates, and stoking optimism for the official non-farm payrolls figures due on Friday.

The kiwi rose to 55.93 British pence from 54.78 pence, advanced to 72.78 yen from 72.61 yen, gained to 65.27 euro cents from 64.49 cents and rose to 4.8209 yuan from 4.7674 yuan.

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