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NZ dollar up as US rate hike signalled

NZ NewswireNZ Newswire 21/09/2016 Paul McBeth

The New Zealand dollar has risen after the US Federal Reserve held off raising interest rates while keeping alive the possibility of a hike later this year, the Bank of Japan changed its policy focus to longer-term rates, and ahead of Thursday's Reserve Bank policy review.

The kiwi gained to 73.56 US cents at 8am in Wellington from 72.85 cents on Wednesday. The trade-weighted index advanced to 78.09 from 77.79.

The Federal Open Market Committee kept the federal funds rate unchanged while saying the case for an increase has strengthened and indicating an increase was on the cards later this year.

That followed the Bank of Japan's review on Wednesday which scrapped a base money target and shifted the focus of its asset-purchase programme to long-term rates. Traders are awaiting New Zealand's Reserve Bank review which is expected to keep the official cash rate at 2 per cent, while retaining a bias for a reduction later this year.

"It would be a big surprise for the market were the RBNZ to cut the OCR today, given the strong recent data flow on the economy and labour market, and bounce in dairy prices," ANZ Bank's Sharon Zollner said.

"The NZD wobbled on the BoJ and Fed but is much where it was 24 hours ago. Markets are fairly united on what the RBNZ will likely do and say this morning, which can set the scene for large moves on any surprises."

The local currency was almost unchanged at 73.83 yen from 73.80 yen after the Bank of Japan announcement.

The kiwi traded at 96.41 Australian cents from 96.59 cents, rose to 4.9054 Chinese yuan from 4.8606 yuan, increased to 65.60 euro cents from 65.44 cents and gained to 56.41 British pence from 56.16 pence.

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