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NZ dollar falls as yen strengthens ahead of Trump inauguration, gains vs pound

Monday 16th January 2017

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The New Zealand dollar fell against the yen, which has broadly strengthened ahead of Donald Trump's inauguration on Friday, and gained against the pound on renewed Brexit concerns.

The kiwi dollar fell to 80.92 yen as at 5pm in Wellington from 81.63 yen in late New York trading on Friday. It rose to 58.98 British pence from 58.44 pence and weakened to 70.89 US cents from 71.27 cents at the end of last week.

The yen strengthened to 114.16 per US dollar from 114.67 on Friday in New York as traders contemplated potential changes in US economic policy under a Trump administration, which could include a more protectionist trading position with partners including China. The kiwi gained against the pound today after the Sunday Times reported that British Prime Minister Theresa May will signal this week her intention to drive ahead with plans to exit the European Union.

"Heavy US dollar trades are starting to flow through, the closer we get to Trump's inauguration," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. The weaker pound "is completely to do with May's speech about a hard Brexit," he said.

May is scheduled to give a speech on Tuesday which the Sunday Times reported would signal plans for a "hard Brexit", trading off membership of the tariff-free zone for the right to curb migration and forge separate trade deals with other regions and nations.  

US financial markets are closed on Monday for Martin Luther King Jr. Day. Globally, two speeches by Federal Reserve chair Janet Yellen, Trump's inauguration and a slew of corporate earnings including from Morgan Stanley and Citigroup, the Federal Reserve's Beige Book survey, and the European Central Bank's policy review will be in focus this week. 

The kiwi gained earlier in the day after figures showed New Zealand food prices fell a seasonally adjusted 0.5 percent in December, more than some economists had expected but not enough to derail projections of a resurgence of inflation in the fourth quarter. The consumers price index for the fourth quarter is scheduled to be released next week. Also this week in New Zealand are surveys of business and consumer confidence and building consents for November.

The trade-weighted index slipped to 78.07 from 78.30.

The kiwi decreased to 94.86 Australian cents from 94.98 cents on Friday in the US. It fell to 4.8882 yuan from 4.9152 yuan after Reuters reported that an analyst at the Chinese Academy of Social Sciences said the nation should stop intervening in the foreign exchange market and allow the yuan to float freely. The local currency fell to 66.80 euro cents from 66.98 cents.

New Zealand's two-year swap rate fell 3 basis points at 2.35 percent, while the 10-year swap rate fell 2 basis points to 3.35.

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