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NZ dollar trades below key support level

NZN 12/05/2017 Jonathan Underhill

The New Zealand dollar is heading for a 0.5 per cent weekly decline, having tumbled Thursday after a 'dovish' Reserve Bank statement.

Traders said the kiwi could extend its decline if it ends the week below a key support level.

The kiwi traded at US68.41c as at 5pm in Wellington from 68.34c late Thursday and down from 68.59c a week ago.

The trade-weighted index was at 74.70 from 74.74 Thursday, below the RBNZ's latest projected average for the TWI in the June quarter of 76.

The kiwi has failed to sustainably push below US68.50c in the past few weeks but is trading near its lowest levels in almost 12 months.

If it ends the week below that level, it could head down to US67c, traders said Friday, and if it closes above, it will have kept broadly within its recent trading range.

Reserve Bank governor Graeme Wheeler surprised the market Thursday by keeping the track for the official cash rate unchanged instead of bringing forward the timing of a rate hike.

"That was a very dovish statement so the market had to take notice of it," said Alex Hill, head of dealing Australasia at HiFX.

"But the market will really make its mind up with the next set of inflationary economic data."

Wheeler kept the official cash rate at 1.75 per cent, surprising some in the market who had been expecting the bank to adopt a mild tightening bias after a spike in oil and food prices pushed inflation above forecast in the first three months of the year.

"Right now, it seems quite clear that the RBNZ has far more confidence to deal with an inflation overshoot than the opposite, especially at a time when policy is already being tightened through the banking sector," ANZ economist Phil Borkin said.

The kiwi rose to 53.06 British pence from 52.81 pence. The local currency traded at 62.93 euro cents from 62.86 cents and fell to 77.75 yen from 78.02 yen. It fell to A92.65c from 93.02c and increased to 4.7203 Chinese yuan from 4.7167 yuan.

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