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NZ dollar gains as risk appetite revives

AAP logoAAP 19/09/2016 Jonathan Underhill

The New Zealand dollar recovered some ground from Friday's sell-off as investors regained some of their risk appetite and resumed the hunt for yield.

The kiwi traded at 72.97 US cents as at 5pm in Wellington, up from as low as 72.48 cents in the wake of the US inflation data on Friday and from 73.02 cents before the figures were released. The trade-weighted index recovered to 77.86, still below the 77.99 level it was at before Friday's inflation figures.

Traders are looking ahead to a trifecta of central bank pronouncements this week - the Bank of Japan, Federal Reserve and Reserve Bank of New Zealand, with little expectation the Fed or RBNZ will change policy but with event risk around all three statements.

Both the Fed and the Bank of Japan begin two-day meetings on Tuesday and the RBNZ's policy review is on Thursday. Before that, the latest GlobalDairyTrade auction is expected to show a further price recovery in New Zealand's biggest export.

"We're seeing a bit of a sell-off in some bond markets and high yield is attracting some interest," said ASB's Tim Kelleher.

Just over half of economists surveyed by Bloomberg forecast an expansion of Bank of Japan stimulus this week while RBNZ governor Graeme Wheeler is expected to keep the official cash rate at 2 per cent.

The kiwi fell on Friday in the US after figures showed the US consumer price index rose 0.2 per cent in August versus expectations of a 0.1 per cent gain.

The kiwi gained to 55.96 British pence from 55.20 pence in Wellington on Friday, with the pound broadly weaker after Bloomberg cited unnamed officials saying UK Chancellor of the Exchequer Philip Hammond was ready to accept that Britain may have to cede membership of the European Union.

The local currency fell to 96.85 Australian cents from 97.21 cents on Friday, declined to 4.8656 yuan from 4.8749 yuan, gained to 65.32 euro cents from 65.02 cents and traded at 74.46 yen from 74.55 yen.

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