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NZ dollar falls near 72 US cts as growing inflationary pressures drive up US Treasury yields

Monday 23rd April 2018

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The New Zealand dollar fell near 72 US cents as growing inflationary pressures stoke expectations for higher US interest rates, underpinning demand for the greenback. 


The kiwi was unchanged at 72.07 US cents at 8am in Wellington from the New York close on Friday, having dropped from 72.40 cents last week in Asia. The trade-weighted index was at 74.33 from 74.29 last week. 


The yield on US 10-year Treasuries rose 5 basis points to 2.96 percent, a four-year high, as recent gains in commodity prices are seen to be adding to inflationary pressures facing the world's biggest economy and support further interest rate hikes by the Federal Reserve. New Zealand's Reserve Bank is expected to refrain from raising the official cash rate until next year at the earliest, reducing the allure of the kiwi as US rates rise. 


"The latest move up in yields towards 3 percent appears to have been driven by the recent rise in commodity prices which has boosted inflation expectations," Bank of New Zealand interest rate strategist Nick Smyth said in a note. "Commodity currencies were among the worst performers on Friday, with the NZD down almost 1 percent, the weakest currency in G10."


Local data today include March credit spending and balances released by the Reserve Bank at 3pm. 


The kiwi rose to 58.75 euro cents from 58.56 cents on Friday in New York after European Central Bank president Mario Draghi said the growth cycle might have peaked, although he expects the expansion to continue. The local currency increased to 51.46 British pence from 51.35 pence last week. 


The kiwi gained to 93.87 Australian cents from 93.66 cents last week and rose to 4.5364 Chinese yuan from 4.5295 yuan. It advanced to 77.69 yen from 77.46 yen last week. 



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