Monday 9th January 2017
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The New Zealand dollar remained below 70 US cents in trading on Monday, with dealers suggesting the local currency would likely trade between 67 and 72 US cents over the coming months, well below the levels achieved in 2016.
The kiwi was trading at 69.57 US cents at 5 pm in Wellington on Monday, down slightly from 69.60 at 8 am this morning and 69.58 US cents on Friday in New York. US non-farm payrolls published on Friday showed average wages rising at their fastest pace since 2010, adding to a theme of quick rate hikes by the US Federal Reserve, strengthing the greenback and sending the local currency down below 70 cents again. It had risen to a three-week high in thin trading during the first days of the New Year. The trade-weighted index dropped to 77.31 from 77.61 on Friday.
Michael Johnston, senior trader at HiFX in Auckland said the decline in the value of the kiwi would be driven by the continued strength of the US dollar.
"In the medium-term, we believe the US dollar will show form and the kiwi/US cross will trade in an at least a 5 cent range, struggling to get above 72 cents, dropping down to 66/67 cents. If dairy prices started to soften more, and you had to start to factor in a Reserve Bank of NZ rate cut, then you could see below 65 cents."
ManufacturingNZ and ExportNZ said earlier on Monday that they expected to benefit from a weaker currency this year, but warned of concerns over trade protectionism policies that have been espoused by the incoming US President, Donald Trump.
The kiwi posted its 2016 peak in September, reaching 74.49 US cents. It spent most of the second half of the year between 70 and 74 US cents.
Trading was quiet on Monday, partly due to a public holiday in Japan. However, the NZ dollar did move significantly lower against the Australian dollar, falling to 95.17 Australian cents from 95.62 cents on Friday.
Johnston said that reflected a rise in the value of the Australian dollar against the greenback, and he expected the Kiwi to decline further against its trans-Tasman counterpart, although it was unlikely to be a dramatic drop.
The local currency rose against the British pound to 56.82 pence from 56.59 pence at the end of last week. It dipped against the Euro, trading at 66.09 euro cents, from 66.24 cents on Friday. It rose against the Yen, buying 81.68 Japanese Yen from 81.20 yen. It fell against the Chinese Yuan, buying 4.8231 Yuan compared to 4.8453 Yuan before the weekend.
New Zealand two-year swap rate rose 2 basis points to 2.38 percent, while the ten-year swap rate rose 6 basis points to 3.43 percent.
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