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NZ dollar rises vs weaker greenback

NZ Newswire logoNZ Newswire 30/06/2017

The New Zealand dollar rose against a broadly weaker US dollar on Friday but may struggle to make further gains in the face of central bankers who are sounding more hawkish than the Reserve Bank.

The kiwi traded at US73.28c as at 5pm in Wellington versus 72.91c as at 8am in Wellington from 73.18c Thursday.

"The key thing is really the broad-based US dollar weakness. The Fed is pretty hawkish but we've seen a change in rhetoric from central banks everywhere," said Sheldon Slabbert, a trader at CMC Markets.

This week saw hawkish comments from European Central Bank President Mario Draghi, Bank of England Governor Mark Carney and from top policy makers at the Bank of Canada.

The kiwi is on track to gain around 6 per cent against the US dollar in the first half of the year, benefiting from ongoing strong data and - up until now - higher domestic interest rates.

However, given that New Zealand's central bank has signalled rates here will be on hold for until September 2019 the kiwi's strength is surprising, said Mr Slabbert.

That divergence means it may be overvalued and will eventually have to correct to come in line with the interest rate differentials if the RBNZ doesn't offer any more details on its plans, he said.

Short-term he said it could see some further gains against the US dollar - given the greenback's weakness - but he would be surprised to see it move any higher against other trading partners.

The kiwi fell to 64.03 euro cents from 64.15 cents and traded at 56.26 British pence from 56.46 pence Thursday.

The kiwi dropped to A95.16c from 95.52c as recovering iron ore prices bolster demand for the Aussie. The local currency traded at 4.9579 Chinese yuan from 4.9552 yuan and dropped to 81.97 yen from 82.10 yen.

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