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NZ Dollar consolidates gains against greenback and sterling

Friday 13th January 2017

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The New Zealand dollar consolidated Friday after strong gains on the back of a weaker US dollar and British pound, weighed by market jitters about US president-elect Donald Trump’s plans and Brexit.

The local currency was trading at 71.11 US cents at 5 pm in Wellington, from 71.19 US cents at 8 am and 70.77 US cents twenty-four hours ago.  The trade-weighted index rose to 78.26 from 77.90 this time yesterday. 

“It (the Kiwi) got a strong lift early Friday after markets continued to react to Trump’s press conference but it has spent the day consolidating,” said Westpac senior foreign exchange strategist Imre Speizer.

The US dollar was hit after US president-elect Donald Trump offered few details on infrastructure and tax reform in his hour-long press conference Wednesday in the US.

It did get some respite Friday when US Federal Reserve Chair Janet Yellen said inflation is getting close to the Fed’s target and the economy is doing quite well, Speizer said.  

Weaker-than-expected domestic electronic card sales in December may also have taken some of the wind out of the local currency's sails.

While Speizer said it may have more upside, it would likely be capped at around 72.00 and he noted a raft of US data later in the global trading day – including retail sales – could push it around.  Longer term, he sees it moving lower as the US dollar moves higher.

ASB Bank also said it expects the Kiwi to continue to soften against the US dollar with president-elect Donald Trump's fiscal policies "expected to be supportive for the USD." It's predicting an end-of-quarter cross rate of 71 cents by March, falling further to 68 cents by December.

The Kiwi continued to gain against the British pound, trading at 58.47 pence from 57.94 pence yesterday, the highest since early November as investors fret about what the economic fallout of Brexit will be.   

It was at 95.00 Australian cents from 94.79 Australian cents yesterday. Speizer said it looks to be correcting after the Aussie had a strong run but “I still like the Aussie higher against the Kiwi” and the rally will likely resume.

Against the Chinese yuan, the kiwi rose to 4.9055 yuan from to 4.8896 yuan twenty-four hours ago. It lifted against the Japanese yen, to 81.80 yen from 80.99 yen. It was trading at 67.03 against the Euro versus 66.70 euro cents. 

New Zealand's two-year swap rate rose 6 basis points at 2.38, while the 10-year swap rate rose 4 basis points to 3.37.

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