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NZ dollar little changed as Asian holidays keep trading subdued, US GDP awaited

Friday 27th January 2017

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The New Zealand dollar was little changed as holidays in China, South Korea and Taiwan kept markets quiet and traders awaited US growth figures.

The kiwi traded at 72.45 US cents at 5 pm in Wellington from 72.47 cents at 8 am and 72.84 late Thursday.The trade-weighted index was at 79.36 from 79.42. 

"Asia has been very quiet. The kiwi has been hovering around the 72.50 level for most of the day," said OMF private client manager Stuart Ive.  Investors were largely treading water ahead of the first reading on fourth-quarter US gross domestic product, expected to be 2.1 percent, later in the global trading day. "Ahead of the FOMC next week, if that comes out as a solid number, we might see some further US dollar strength."

However, while a stronger US dollar "might give the Kiwi a bit of a nudge to the downside" he expects it to stick to recent ranges ahead of Reserve Bank of New Zealand's rate decision Feb. 9, he said.

The market will be watching for any comments on inflation, in particular, after data Thursday showed inflation has moved back within the Reserve Bank's target band and has accelerated more than the bank was projecting.  In its last monetary policy statement in November the central bank had indicated rates would remain on hold until December 2019. "Given the path that inflation appears to be on, if that continues into mid of this year, then it (a rate hike) would have to be on the cards" sooner than expected, Ive said. 

The kiwi is heading for a 1.2 percent weekly gain against the greenback.

Against the Australian dollar, the kiwi was trading at 96.19 Australian cents in Wellington from 96.14 Thursday.   While a spike higher on a stronger-than-expected domestic inflation had triggered some profit taking Thursday afternoon, Ive said it clearly remains on "solid footing" against the Aussie. The fact that it has weakened doesn't mean it's going to go lower from here, he said. 

The local currency fell to 4.9822 Chinese yuan from 5.0099 yuan and gained to 67.86 euro cents from 67.68 cents Thursday. It was trading at 57.61 British pence from 57.59 pence and continued to pick up against the yen, rising to 83.30 yen from 82.53 yen 24 hours ago. 

New Zealand's two-year swap rate rose one basis point to 2.42 percent while the 10-year swaps rose 4 basis points to 3.56 percent.

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