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Dollar holds near 3-year high as traders look ahead to CPI, China GDP

 The New Zealand dollar held near the three-year high it charted after the Federal Reserve signalled US interest rates will remain at a record low for longer, driving down the greenback.

The kiwi traded at 87.17 US cents at 5pm in Wellington, having gained to as high as 87.25 US cents at the start of the day after the Fed minutes were released, and from 87.01 cents late yesterday. The trade-weighted index edged lower to 80.73 from 80.83 yesterday.

Minutes of the Fed's March policy meeting showed the US central bank wanted to correct speculation in financial markets that interest rates were set to rise on signs of faster growth in the world's biggest economy. The kiwi pared its gains after weaker-than-expected trade data from China, the nation's biggest market, although separate figures showing the Australian economy added more jobs was supportive for the currency.

"The kiwi does look well supported," said Robert Rennie, chief currency strategist at Westpac Banking Corp in Sydney. "The Fed's minutes emphasised that you shouldn't be looking at forecasts, you should be looking at its overall message, and that is: rates will stay super-accommodative for a considerable period of time."

Rennie said the longer the kiwi dollar stays above 86.75 US cents the greater the chances it will attempt to get back to record highs of 88.43 cents.

Traders are looking ahead to New Zealand first-quarter inflation figures due out next Wednesday and Chinese gross domestic product data for the same period.

"Based on the commentary coming out of China, we're being softened up for softer GDP next week," Rennie said.

New Zealand's Reserve Bank started hiking rates last month to head off rising inflation and a string of increases of between 25 and 50 basis points is expected over the next couple of years as stimulus provided by low interest rates is gradually removed while the economy recovers.

The New Zealand dollar slipped to 92.61 Australian cents from 92.80 cents at 8am.

The kiwi weakened to 51.86 British pence from 51.88 pence at the start of the day and traded at 62.94 euro cents from 62.87 cents. It fell to 88.63 yen from 88.81 yen.

(BusinessDesk)