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NZ dollar up after US, Japan moves

NZ NewswireNZ Newswire 27/07/2016 Jonathan Underhill

The New Zealand dollar rose after the Federal Reserve said near-term risks for the world's biggest economy were diminishing, keeping on track expectations for an interest rate hike this year.

The kiwi rose to 70.71 US cents as at 8am in Wellington, from 70.38 cents late on Wednesday. It gained to 74.36 yen from 74.16 yen following Japan's announcement of a stimulus package of more than YEN28 trillion ($NZ378.28 billion), bigger than expected and lifting expectations for easing by the bank of Japan on Friday.

The Fed left its target interest rate in a range of 0.25 per cent to 0.5 per cent as expected and said near-term risks to the US economic outlook had diminished and the labour market had improved, suggesting it will raise rates later this year.

The Fed statement kept alive bets that the central bank could raise rates as soon as September, although a Reuters survey suggests it will wait until December.

"Overall, we'd say the Fed is buying time, and not trying to point the market toward an imminent hike, but our view of a hike by year-end seems on track," said BNZ's Kymberly Martin.

After Japan's Prime Minister Shinzo Abe unveiled his stimulus package "the market is now speculating whether this will be complemented by an announcement of further monetary stimulus from the Bank of Japan tomorrow".

The kiwi gained to 94.39 Australian cents from 93.98 cents after Australia's consumer prices remained weak in the second quarter, keeping alive expectations the Reserve Bank of Australia will cut the cash rate next week.

The kiwi fell to 4.7143 yuan from 4.6947 yuan, slipped to 53.49 British pence from 53.60 pence from 53.76 pence and was little changed at 63.91 euro cents from 63.99 cents.

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