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Traders take 'long' positions on NZ dollar

NZ Newswire logoNZ Newswire 26/06/2017 Jonathan Underhill

The New Zealand dollar was little changed near a four-month high on Monday and may struggle to push much higher because of the sheer weight of bets on a rise which traders say put the kiwi at more risk of a correction.

The kiwi was trading at US72.83c as at 5pm in Wellington from 72.84c in New York on Friday and from 72.67c in Asia last week.

US Commodity Futures Trading Commission data shows that after traders had been betting against the kiwi, taking 'short' positions, they now held the highest net speculative 'long' NZ dollar positions in more than four years.

Long positions are bets that a currency will rise.

While there are good reasons to favour the kiwi dollar, including relatively higher interest rates and a relatively strong domestic economy, traders said the currency is at more risk of a drop given the lopsided bets on an increase.

"I'm not saying it is going to turn but this will restrict how high it goes," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

The kiwi may struggle to break through resistance at US73.50c, he said.

"We've seen strong buying in our bond market in the last month or so and we're still seen as a bit of a safe haven," he said.

Interest rate differentials favour the kiwi over the Australian dollar.

The kiwi slipped to A96.08c from 96.18c at the start of the day to be little changed from 96.10c in New York on Friday.

Mr Kelleher said US data and speeches are likely to take centre stage this week.

The kiwi traded at 57.14 British pence from 57.26 pence and traded at 81.04 yen from 81 yen. It rose to 4.9806 yuan from 4.9769 yuan and traded at 65.07 euro cents from 65.09c.

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