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NZ dollar pares Fed gains after local GDP softer-than-expected

Thursday 16th March 2017

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The New Zealand dollar pared some of its gains after the US Federal Reserve lifted rates but kept the track for further hikes unchanged after the domestic growth picture was softer than expected.

The kiwi dollar was trading at 69.91 US cents as at 5pm in Wellington versus 70.24 US cents as at 8am and 69.31 cents late yesterday. The trade-weighed index was at 76.07 from 75.97.

The US dollar took a tumble when the Fed  kept to its projection for two more increases this year. "The market got the rate hike but not the icing on the cake, which would have been an additional dot plot for this year and that's what the noise has been about today," said OMF private client advisor Stuart Ive.  

The kiwi dollar shot up about 1 US cent but then fell back when the domestic fourth quarter gross domestic product data was weaker-than-expected. The GDP expanded 0.4 percent in the three months ended Dec. 31, following a revised 0.8 percent increase in the September quarter, Statistics New Zealand said. Economists had been expecting growth of 0.75 percent while the central bank tipped growth of 1.0 percent on quarter. 

"Following today's data we remain comfortable with our view that there is no rush to raise the OCR anytime soon," said Kiwibank chief economist Zoe Wallis. 

Ive said the kiwi dollar then bounced back up when Australia's unemployment rate rose to a higher-than-expected 5.9% in February from 5.7% in January, although has faded. 

The Kiwi was trading at 91.03 Australian  cents from 91.56 cents late yesterday and Ive said the 91.00 level was fairly key support. 

Looking ahead, markets will be watching for rate decision from the Swiss National Bank and the Bank of England later in the global trading day as well as US President Donald Trump's 2018 budget blueprint. 

The kiwi dollar was at 65.19 euro cents from 65.29 cents and 56.99 British pence from 57.02 pence. It traded at 4.8206  yuan from 4.7931 yuan and at 79.28 yen from 79.60 yen yesterday.

The two-year swap rate fell 3 basis points to 2.28 percent while the 10-year swaps shed 7 basis points to 3.50 percent.

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