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NZ dollar drops as rising US bond yields help lift greenback

A sell-off of global bond markets and US dollar strength were the key themes overnight.

Jonathan Underhill
Fri, 28 Oct 2016

The New Zealand dollar fell as rising US treasury bond yields help drive up the greenback.

The kiwi fell to 71.20USc as at 8am in Wellington from 71.51USc late yesterday. The trade-weighted index dropped to 76.92 from 77.07.

The yield on 10-year US treasuries rose as high as 1.87 percent overnight, the highest since late May, after stronger-than-expected UK economic figures sparked a selloff in global bond markets. The US Dollar Index climbed as much as 0.3 percent. In New Zealand, the two-year swap rate rose to 2.12 percent, a three-month high.

"Two key themes overnight have been a sell-off of global bond markets and US dollar strength," said Jason Wong, currency strategist at Bank of New Zealand. "A global bond market selloff ensued at the beginning of European trading session, following the release of stronger UK GDP data."

The kiwi fell to 58.45 British pence from 58.54 pence late yesterday after figures showed gross domestic product rose 0.5 percent in the third quarter, exceeding expectations of a 0.3 percent gain. The more robust growth confounded traders who are expecting a drop-off in the UK economy following the Brexit vote.

Traders are now awaiting US GDP figures for the third quarter, which are expected to show annualised growth accelerated to 2.5 percent from 1.4 percent, adding to the rationale for an interest rate hike from the Federal Reserve in December.

The kiwi was little changed at 4.8267 yuan from 4.8462 yuan late yesterday when the yuan was fixed at a six-year low of 6.7921 yuan per US dollar. Beijing is gradually trying to weaken its currency to make its exports more competitive, without causing a large outflow of money from companies and wealthy individuals concerned about falling buying power.

It dropped to 65.28 euro cents from 65.61 cents and rose to ¥74.89 from ¥74.68 . It was little changed at 93.78Ac from 93.76Ac yesterday.

(BusinessDesk)

Jonathan Underhill
Fri, 28 Oct 2016
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NZ dollar drops as rising US bond yields help lift greenback
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