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Surge in US bond yields saps kiwi's appeal

NZ NewswireNZ Newswire 21/11/2016 Jonathan Underhill

New Zealand coin is arranged for a photograph in Wellington, New Zealand © Mark Coote New Zealand coin is arranged for a photograph in Wellington, New Zealand The New Zealand dollar was little changed at about 70 US cents and is poised to extend its 5.2 per cent decline of the past two weeks as surging US bond yields sap the appeal of returns from the kiwi.

The local currency traded at 69.99 US cents as at 5pm in Wellington from 70.09 cents in late New York trading on Friday. The trade-weighted index was at 77.29 from 77.23.

The US dollar climbed to the highest level in about six months against the yen on Monday, while the yield on the benchmark US 10-year Treasury bond has surged to a 12 month high amid expectations Donald Trump's US presidential victory will help stoke economic growth and inflation in the US, with an interest rate hike by the Federal Reserve next month seen almost as a certainty.

The greenback has strengthened in the wake of Trump's win after he vowed to embark on a massive infrastructure spending programme and slash corporate taxes.

The trend of a stronger US dollar "is still very much intact," said Sheldon Slabbert, a sales trader at CMC Markets.

"Looking at the kiwi dollar, it is still under pressure as US yields are increasing."

The kiwi didn't move much after Statistics New Zealand released figures showing retail sales increased a seasonally adjusted 0.9 per cent in the three months ended Sept. 30, slowing from a 2.2 per cent rise in the June quarter.

The kiwi was little changed at 77.71 yen from 77.70 yen on Friday in New York and traded at 4.8272 yuan from 4.8266 yuan. It traded at 56.71 British pence from 56.73 pence and fell to 66.03 euro cents from 66.16 cents. The kiwi traded at 95.59 Australian cents from 95.50 cents.

The 2-year swap rate ended the day at 2.21 per cent and the 10-year swap rate at 3.22 per cent.

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