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NZ dollar gains after failing to break through support levels, helped by terms of trade, Aussie GDP

Wednesday 1st June 2016

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The New Zealand dollar extended its gains after failing to break through key support levels this week as improved terms of trade and better-than-expected Australian growth figures boosted sentiment.

The kiwi rose to 67.85 US cents as at 5pm in Wellington, from 67.27 cents late yesterday. It pared an earlier gain against the Australian dollar after the growth report but was still higher at 93.25 Australian cents from 92.79 cents yesterday.

The New Zealand dollar fell as low as 66.74 US cents this week but failed to push lower against a greenback that has been driven high by speculation the Federal Reserve will raise interest rates this month. The kiwi gained against the US dollar today after figures showed a stronger-than-expected 4.4 percent increase in New Zealand's first-quarter terms of trade and a 1.1 percent expansion in Australian gross domestic product in the first three months of the year.

"Terms of trade was good and those Australian GDP numbers were a bit of a standout and helped push momentum," said Alex Hill, head of corporate FX at NZForex. "The price action that's occurred recently has been about a strong US dollar" but "it looks like there's been a bit of short-term risk sentiment" favouring the kiwi and Aussie dollars.

Other figures showed New Zealand residential property values continued to push higher in May, as increased demand and limited supply underpinned the market. The average value of a New Zealand home rose 12.4 percent to $577,829 in May from the year earlier, in line with April's 12 percent annual pace, according to state-owned valuer Quotable Value.

With the Reserve Bank scheduled to release its monetary policy statement on June 9, "the focus certainly comes back on the kiwi," he said. The probability of an interest rate cut by the RBNZ next week has fallen away to 20 percent and there has been "a flip-flopping of views on the RBNZ, the Reserve Bank of Australia and the Federal Reserve."

The two-year swap rate was unchanged at 2.29 percent and the 10-year swaps rose 3 basis points to 2.93 percent.

The kiwi rose to 46.85 British pence from 45.83 pence yesterday after the latest telephone poll by ICM showed 45 percent of Britons supported leaving the European Union, a move known as the Brexit, compared with 42 percent who favoured remaining. A referendum on the issue is due to take place on June 23. 

It rose to 61.03 euro cents from 60.41 cents, advanced to 4.4727 yuan from 4.4278 yuan and was little changed at 74.71 yen from 74.77 yen. The trade-weighted index rose to 73.19 from 72.57 yesterday.

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