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NZ dollar gains as Fed seen in no rush, Australia adds more jobs

Thursday 18th August 2016

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The New Zealand dollar gained after minutes of the last Federal Reserve meeting indicated it's in no rush to hike interest rates while stronger-than-expected Australian jobs data lifted the kiwi in line with a stronger Aussie dollar.

The kiwi rose to 72.88 US cents as at 5pm in Wellington from 72.52 cents late yesterday. The trade-weighted index was at 76.80 from 76.68.

The US dollar index fell to a 3-month low after the Federal Open Market Committee minutes showed a less hawkish central bank than some in the market had expected, with several policymakers wanting to see more data before deciding whether a hike was warranted. Meanwhile, traders pushed back bets the Reserve Bank of Australia is eager to cut interest rates across the Tasman after figures showed that economy added 26,200 jobs in July, more than twice the expected pace, while the unemployment rate fell to 5.7 percent from 5.8 percent.

"The interest rate differential is in New Zealand's favour and that's brought some flows back to the kiwi," said Sheldon Slabbert, sales trader at CMC Markets. The Fed may end up being disappointed with upcoming economic data and "is fighting for a bit of credibility now, given it keeps flip-flopping on the direction they are giving markets."

The Australian jobs data "just put the region on a steady footing" in terms of supporting the currencies, he said.

The local currency traded at 94.56 Australian cents from 94.54 cents yesterday. The Australian dollar rose to 76.97 US cents from 76.61 cents immediately before the jobs data was released.

The kiwi began rising from 1pm NZ time, when the ANZ-Roy Morgan consumer confidence index was released, showing it slipped to 117.7 this month from 118.2 in July.

The New Zealand dollar fell to 72.92 yen from 73.14 yen and slipped to 64.40 euro cents from 64.54 cents. The kiwi rose to 55.78 British pence from 55.67 pence and rose to 4.8242 yuan from 4.8087 yuan.

New Zealand's two-year swap rate fell 2 basis points to 1.93 percent and 10-year swaps fell 1 basis points to 2.38 percent.

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