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NZ dollar gains against broadly weaker greenback after Fed minutes

Thursday 17th August 2017

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The New Zealand dollar gained against a broadly weaker greenback after minutes from the US Federal Reserve's policy meeting potentially signaled policy makers could delay a rate hike. 

The kiwi rose to 73.28 US cents as at 5pm in Wellington from 73.06 US cents at 8am and from  72.34 cents late yesterday. The trade-weighted index climbed to 77.13 from 76.52.

"It's held up above 73 cents all day" after it "rallied quite hard on the back of that US dollar weakness," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

The minutes showed that some participants expressed concern about the recent decline in inflation and noted their increased uncertainty about the outlook for inflation. In contrast, others cautioned that a delay in gradually removing policy accommodation could result in an overshooting of the Fed's inflation objective that would likely be costly to reverse, or that a delay could lead to an intensification of financial stability risks or to other imbalances that might prove difficult to unwind.

However, the minutes showed that participants generally agreed it was appropriate to signal the plan for reducing the Federal Reserve's securities holdings would begin relatively soon, absent significant adverse developments in the economy or in financial markets. 

The kiwi initially climbed against the Aussie dollar after the release of Australian labour market figures, reaching 92.39 Australian cents, before easing back to 92.24 cents from 92.32 cents late yesterday. The figures showed the number of people employed rose by 27,900 and unemployment fell, as expected, to 5.6% in July from an upwardly revised 5.7% in June.  However, the number of people in full-time work fell 20,300 in July, while those in part-time work rose 48,200. 

While the headline numbers were positive it was essentially growth in part-time jobs, said Kelleher. 

Looking ahead, he said investors will be watching for minutes from the European Central Bank for direction as well as some US data later in the global trading day. 

The kiwi rose to 80.51 yen from 80.07 yen yesterday and traded at 4.8861 yuan from 4.8385 yuan. The kiwi gained to 62.20 euro cents from 61.60 cents and rose to 56.78 British pence from 56.20 pence.

New Zealand's two-year swap rate was unchanged at 2.17 percent while 10-year swaps rose fell 3 basis points to 3.14 percent.


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