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NZ dollar slips against greenback as US bond yields rise near 10-month high

Wednesday 10th January 2018

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The New Zealand dollar dipped against the greenback as rising yields on US government bonds stoked demand for the world's reserve currency, after traders were spooked by the Bank of Japan trimming its bond purchases yesterday. 

The kiwi decreased to 71.69 US cents as at 9am in Wellington from 71.79 cents yesterday. The trade-weighted index edged up to 74.79 from 74.64 yesterday. 

The yield on US 10-year Treasuries rose almost 6 basis points to 2.54 percent, the highest since March last year, as investors cooled on bonds as an upcoming glut of supply coincided with the Bank of Japan surprising markets by reducing its purchases of long-dated Japanese bonds. Billionaire fund manager Bill Gross of Janus Henderson Group said on Twitter that the rise in yield confirmed a bear market for bonds, saying 25-year long-term trendlines had broken in the five- and 10-year notes. 

“How high yields go is still a highly polarising question. But if real yields start to rise convincingly too, we’d be keeping a close eye on broader asset valuations as their lofty levels may start to be questioned,” ANZ Bank New Zealand senior economist Phil Borkin said in a note. “The impetus for a push higher (in the kiwi) may again not be there today, particularly following the surge in US yields, but we still feel that is the main risk in the near-term.”

The local currency declined to 80.77 yen from 80.85 yen yesterday after the Bank of Japan’s surprise move to cut bond purchases stoked demand for Japan’s currency. The yield on Japanese 10-year government bonds edged up half a basis point to 0.7 percent. 

The kiwi rose to 91.65 Australian cents from 91.31 cents yesterday and advanced to 4.6794 Chinese yuan from 4.6161 yuan. It traded at 60.10 euro cents from 59.96 cents yesterday and increased to 53 British pence from 52.87 pence yesterday. 

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