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RBNZ's bid to talk down kiwi falls short

NZ Newswire logoNZ Newswire 22/06/2017 Rebecca Howard

The New Zealand dollar rose on Thursday after the Reserve Bank kept the official cash rate at 1.75 per cent and efforts to talk down recent strength in the currency was seen as relatively soft.

The kiwi gained to US72.52c as at 5pm from 72.25c as at 8am in Wellington and 72.16c Wednesday. It rose to A96.01c from 95.49c.

Central bank governor Graeme Wheeler kept the benchmark rate unchanged citing well-anchored inflation expectations, and tried to talk down a 3 per cent increase in the trade-weighted increase over the past six weeks, which he said "would help rebalance the growth outlook towards the tradables sector".

Some economists anticipated Mr Wheeler would try to jawbone the currency lower, however his efforts fell short of what investors expected.

"The market was short kiwi-Aussie cross going into the statement and was certainly looking for Wheeler to make more aggressive comments about the currency," and that was enough to propel the kiwi higher, said Martin Rudings, senior dealer foreign exchange at OMF in Wellington.

UBS New Zealand economist Robin Clements said the central bank's comments on the dollar were "understandable, but hardly threatening" while Westpac acting chief economist Michael Gordon said the bank didn't "express any significant discomfort with the New Zealand dollar".

The trade-weighted index was at 78.25 from 77.94 Wednesday and is around 3 per cent higher than what the bank was projecting for the June quarter.

Mr Rudings said the kiwi would likely attract sellers around the A96.30c mark and would drift lower with a lack of data on the horizon domestically and in Australia.

The kiwi was at 57.22 British pence from 57.12 pence and traded at 80.55 yen from 80.31 yen. It rose to 4.9530 yuan from 4.9281 yuan and was at 64.91 euro cents from 64.83 cents.

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