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NZ dollar gains as investors shy away placing more bets for the US dollar to gain

Friday 31st October 2014

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The New Zealand dollar advanced as investors shied away from placing further bets that the greenback would rise.

The kiwi rose to 78.42 US cents at 8am in Wellington, from 77.90 cents at 5pm yesterday. The trade-weighted index gained to 76.52 from 76.06 yesterday.

Investors eschewed placing further bets that the US dollar would rise as data from the US Commodities Futures Trading Commission showed the net number of 'long' positions, betting the greenback would likely rise in value, is at its highest since almost 2002, excluding a jump last year on the Federal Reserve pulling back its quantitative easing programme. The dollar index, which measures the greenback against a basket of currencies, fell from its highest in more than three weeks, even after a report showed US third quarter gross domestic product rose at a 3.5 percent annual pace, beating expectations for a 3 percent gain.

"The US dollar tried to rally immediately after that data but really failed to," said Bank of New Zealand currency strategist Raiko Shareef. "It's a story of positioning and how far investors are stretched. With investors already 'long' on the US dollar, it's quite hard for it to push further because it would require more people to get on the bandwagon."

The New Zealand dollar may have gained more against the greenback because it dropped the most yesterday following a more upbeat statement about the prospects for the US economy and as economists pulled back their expectations for interest rate rises here after the Reserve Bank removed a sentence in its policy statement referring to the need for further interest rate rises.

"Kiwi has probably risen the furthest because it dropped the furthest yesterday and it is making some of those gains back, probably unfairly, we still have pretty bearish view on kiwi dollar but I think it is just a positioning thing for now," said the BNZ's Shareef.

The kiwi will probably trade between 78 US cents and 79 cents today, BNZ said.

In New Zealand today, data is released on September building consents.

The New Zealand dollar fell to 32.52 Russian ruble from 33.65 ruble yesterday as the Russian currency rose sharply after the nation's central bank intervened in the market to shore up the local currency.

The New Zealand dollar was little changed at 88.78 Australian cents from 88.83 cents yesterday.

The kiwi advanced to 62.17 euro cents from 61.73 cents after a preliminary measure of German October inflation printed fell short of expectations. Tonight, the focus will be on data for October Eurozone inflation.

The local currency rose to 85.74 yen from 84.94 yen yesterday amid speculation Japan's Government Pension Investment Fund may announce new asset allocations today which would see higher weights applied to equities and overseas bonds, which would weigh on the Japanese currency.

The New Zealand dollar was little changed at 88.78 Australian cents from 88.83 cents yesterday and gained to 49 British pence from 48.74 pence.


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