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US interest rate sentiment will drive NZD

NZ NewswireNZ Newswire 4/04/2016 Tina Morrison

Sentiment about US interest rates will probably drive the kiwi this week, with analysts split on the currency's direction.

The local currency may trade between 67.20 US cents and 71 cents this week, according to 12 analysts in a BusinessDesk survey. Five expect the kiwi to gain, five bet it will decline and two say it will remain largely unchanged. It recently traded at 68.96 US cents.

Currency traders are adjusting their outlook for US interest rates after the Federal Reserve last month pulled back its expectation for hikes this year to two, from four, and following Fed chair Janet Yellen's comments in a speech last week that the Fed should "proceed cautiously" in adjusting policy.

That's made the greenback less attractive even in the face of robust economic data such as last week's non-farm payrolls report, and pushed up the value of other currencies like the kiwi.

"The US dollar will still be under downward pressure even with that good payrolls number but I can understand that some people will say that the payrolls data was quite good and although the dollar didn't go up, it should do later on this week," said Imre Speizer, senior market strategist at Westpac Banking Corp in New Zealand.

Speizer said Yellen's public comments in the US on Thursday will be the key event for the week.

Yellen will join a panel discussion along with former Fed chairs Ben Bernanke, Alan Greenspan and Paul Volcker.

"If she backs up what she said, that she's still kind of reluctant, then I think the US dollar will stay in the dogbox," Speizer said.

In New Zealand, the NZIER publishes its quarterly survey of business opinion on Tuesday.

Barfoot & Thompson is expected to publish its monthly housing data on Tuesday, with state-owned Quotable Value due to release its latest data on property values on Wednesday.

ANZ Bank is due to publish its monthly commodity price index on Tuesday, and the latest update on dairy prices will come with the GlobalDairyTrade auction early Wednesday morning.

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