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NZ dollar gains against broadly weaker greenback as South Korean exercises get underway

Tuesday 22nd August 2017

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The New Zealand dollar rose against a broadly weaker greenback as US joint exercises with South Korea put tensions with the North back into focus while the lack of economic news had traders looking ahead to the central banker symposium at Jackson Hole.

The kiwi increased to 73.21 US cents as at 8am in Wellington from 73.16 cents late yesterday. The trade-weighted index was at 76.99 from 77.05 yesterday.

The US and South Korea yesterday began their annual joint military exercises named Ulchi-Freedom Guardian, which North Korea seized on as being "aimed to ignite a nuclear war on the Korean peninsula at any cost," according to the North's state media. With little economic news scheduled, the meeting of central bankers in Wyoming later in the week is being keenly awaited, with Federal Reserve chair Janet Yellen and European Central Bank president Mario Draghi due to speak.

"Traders will be keeping their powder dry for the annual Jackson Hole symposium hosted by the Kansas City Fed which kicks off towards the end of the week," Jason Wong, currency strategist at Bank of New Zealand, said in a note. "There’s no guarantee much new will come out of it, but anticipation is always high for this event."

The US dollar index fell to its lowest level in more than a week overnight, with the euro one of the main beneficiaries. With no domestic economic news due out in New Zealand today, the next significant event will be the Pre-election Economic and Fiscal Update (Prefu) tomorrow, which comes amid mounting spending promises from both the National government and opposition parties.

The election is coming more into focus for the financial markets, with the news yesterday that United Future leader Peter Dunne, who has been a key supporter for National, has resigned and won't contest the election.

The kiwi fell to 61.96 euro cents from 62.25 cents yesterday and traded at 56.77 British pence from 56.81 pence. It was little changed at 4.8780 yuan from 4.8798 yuan and slipped to 79.73 yen from 79.89 yen. The kiwi fell to 92.19 Australian cents from 92.30 cents.


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