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NZ dollar falls vs pound after BoE's Vlieghe says higher rates may be needed

Monday 18th September 2017

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The New Zealand dollar fell against the pound after Gertjan Vlieghe, regarded as one of the more dovish Bank of England policymakers, said the central bank may have to raise interest rates in coming months.

The kiwi was trading at 53.66 British pence as at 8:30am in Wellington from 53.65 pence on Friday in New York, having fallen from 53.97 pence in Wellington at the end of last week. The kiwi traded at 72.80 US cents from 72.88 cents in New York.

Vlieghe's comments came a day after the BoE kept its benchmark rate unchanged and echoed the views of governor Mark Carney. The majority of the bank's policy committee now say some withdrawal of monetary stimulus "is likely to be appropriate over the coming months" to combat inflation. Meanwhile, US retail sales fell 0.2 percent in August, against expectations of a 0.1 percent gain, and industrial production tumbled 0.9 percent. Weak data has been expected in the wake of Hurricane Harvey.

"The USD was under pressure at the end of last week due to softer data and the ongoing surge in the pound," said Con Williams, rural economist at ANZ Bank New Zealand, in a note. "Election uncertainty will continue to weigh on the NZD until the weekend provides more clarity (perhaps)."

The local economic data week kicks off today with the performance of services index for August but the main event ahead of the election on Saturday is likely to be gross domestic product figures for the second quarter, due out on Wednesday and expected to show the economy accelerated to a 0.8 percent quarterly pace for an annual rate of growth of 2.5 percent.

The kiwi traded at 90.93 Australian cents from 91.07 cents in New York on Friday. It traded at 61 euro cents, little changed from last week and edged up to 80.87 yen from 80.79 yen. The kiwi fell to 4.7684 yuan from 4.7736 yuan.

The trade-weighted index was at 75.86 from 75.91 on Friday.


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