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NZ dollar steady after ECB hints

NZN 28/06/2017 Rebecca Howard

The New Zealand dollar spent the day treading water after its overnight tumble when European Central Bank president Mario Draghi hinted the ECB might start winding down its stimulus.

The local currency could see further volatility overnight as different central bankers speak at the three-day European Central Bank Forum on Central Banking.

The kiwi traded at 64.11 euro cents at 5pm versus 64.10 euro cents at 8am in Wellington. It traded at US72.76c from 72.72c at 8am and from 73.00c late Tuesday.

"It's been a very quiet day after a few fireworks overnight," said ANZ senior economist Phil Borkin.

However, with more speeches to come overnight, including a panel discussion with Bank of England governor Mark Carney, the ECB's Mr Draghi, Bank of Japan governor Haruhiko Kuroda and Bank of Canada governor Stephen Poloz, there could be further volatility, he said.

The market will be interested to see "if this rhetoric and growing chorus about removing some of this liquidity" continues, said Mr Borkin.

"If that really is going to happen then risk currencies like the New Zealand dollar could face a few more headwinds," he said.

BNZ senior market strategist Jason Wong noted New Zealand and Australia's central bank's stand out for their neutral policy tone at a time when the language of other central banks has moved towards removal of policy accommodation.

"If the RBNZ holds the neutral policy line - something we expect through the rest of this year - against the shifting tide of other central banks, then the NZ-global rates differential plays to a softer NZD," said Mr Wong.

The kiwi dropped to 56.77 British pence from 57.35 pence.

The local currency slipped to A95.72c from 96.07c and traded at 81.59 yen from 81.63 yen. The kiwi fell to 4.9487 yuan from 4.9956 yuan.

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