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NZ dollar weakens on greenback demand before RBNZ interest rate decision

Thursday 25th July 2013

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The New Zealand dollar weakened amid broad demand for the greenback after better than expected economic reports bolstered optimism about a recovery in the world's largest economy.

The kiwi dropped to a three-day low of 79.01 US cents early this morning and recently traded at 79.28 cents, down from 79.66 cents at the 5pm market close in Wellington yesterday. The trade-weighted index weakened to 75.13 from 75.18 yesterday.

The US Dollar Index, which measures the greenback against a basket of currencies, rose after reports showed sales of new US homes rose more than forecast to the highest level in five years and a gauge of factory activity also beat expectations. In the local market, traders are awaiting the Reserve Bank of New Zealand's decision on the official cash rate to be released at 9am, which is expected to keep rates at a record low 2.5 percent.

"We are not expecting too much reaction from this morning's RBNZ OCR review," ANZ New Zealand strategist Carrick Lucas said in a note. "Expect the RBNZ to attempt to talk the NZD lower at today's OCR review, but with that being the status quo through 2013, impact should be limited."

The New Zealand dollar rose to its highest in almost five years against the Australian dollar after a report on weaker than expected manufacturing in China yesterday raised concerns about future demand from Australia's largest trading partner.

The kiwi leapt as high as 86.63 Australian cents, matching its high touched last Friday which was the highest level since November 2008. The local currency recently traded at 86.50 Australian cents, up from 86.01 yesterday.

The New Zealand dollar slipped to 60.11 euro cents from 60.31 cents yesterday and weakened to 51.79 British pence from 51.86 pence. The kiwi advanced to 79.50 yen from 79.38 yen.

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