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Oil impasse lowers Kiwi

NZ NewswireNZ Newswire 17/04/2016 Tina Morrison

The New Zealand dollar has fallen after oil producers failed to reach agreement to freeze production at a weekend meeting in Doha, denting demand for commodity-linked currencies.

The kiwi dropped to US68.68 cents at 8am on Monday in Wellington, from US69.15c at the New York close and US68.89c on Friday. The trade-weighted index weakened to 72.56 from 72.71 on Friday.

Eighteen oil producing nations met in Doha at the weekend to secure a deal to stabilise oil output at January levels in an attempt to stem an oversupply and bolster prices.

However Saudi Arabia said Iran, which was absent from the talks, must take part in the freeze, something the country has refused to do until its production returns to pre-sanction levels. The failure to reach agreement weighed on investor demand for risk-sensitive assets such as equities and commodity-linked currencies such as the kiwi.

"The news of that obviously will put a lot of pressure on commodity currencies as we've already seen this morning and we will also probably see a bout of risk aversion kicking in," said OMF's Stuart Ive.

New Zealand economic data on first quarter inflation scheduled for release at 10.45am on Monday is expected to show prices advanced 0.1 per cent from the year earlier quarter, according to a Reuters poll of economists.

However, Mr Ive noted any improvement in consumer prices was now "out the window" because of the prospect of future deflation driven by lower oil prices.

The BNZ-BusinessNZ Performance of Services Index is scheduled for release at 10.30am.

On Monday morning, the New Zealand dollar advanced to 89.90 Australian cents from A89.32c on Friday. It fell to 48.34 British pence from 48.67p on Friday, dropped to 60.73 euro cents from 61.15c, slid to 74.31 yen from 75.51 yen, and weakened to 4.4457 yuan from 4.4675 yuan.

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