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Dollar gains as weak US data trims bets on Fed rate hikes

Paul McBeth
Thu, 16 Oct 2014

The New Zealand dollar gained as weaker than expected US economic data caused traders to trim their bets on how early the US Federal Reserve will start hiking interest rates.

The kiwi rose to 79.72 US cents at 5pm from 79.52 cents at 8am and 78.37 cents yesterday. The trade-weighted index advanced to 77.20 from 76.43 yesterday.

The dollar index, a measure of the greenback against a basket of currencies, dropped near a month-low after weaker-than-expected US retail sales and producer price data revived concerns about growth in the world's largest economy, leading to a growing view expressed in financial markets that the Fed will wait even longer into 2015 than is already expected before raising interest rates from close to zero.

"There's a lot more uncertainty when the Fed kicks off and traders have pushed the timing right out," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "That pushed US interest rates down, and the US dollar down, which pushed the kiwi/US up. It could go to 81 (US cents) in the next week or two."

Westpac's Speizer anticipates the kiwi will start falling again next year when the Fed's timing becomes clearer.

A rebound in dairy prices at Fonterra Cooperative Group's latest GlobalDairyTrade auction was also a boost for the kiwi after prices rose from a five-year low, while New Zealand export log prices rose in October as a weaker kiwi boosted local currency returns, according to Agrifax data.

The BNZ-BusinessNZ performance of manufacturing index showed New Zealand's manufacturing continued to accelerate in September, with agricultural production stoking activity.

The local currency gained to 84.58 yen at 5pm in Wellington from 84.01 yen yesterday, and increased to 90.70 Australian cents from 89.89 cents. It advanced to 62.19 euro cents from 61.98 cents yesterday, and rose to 49.87 British pence from 49.26 pence.

(BusinessDesk)

Paul McBeth
Thu, 16 Oct 2014
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Dollar gains as weak US data trims bets on Fed rate hikes
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