Kiwi hits one-year high
after RBNZ falls short, sterling drops
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[August 11, 2016]
By Anirban Nag
LONDON (Reuters) - The New Zealand
dollar surged to its highest in more than a year on Thursday after
its central bank made a smaller interest rate cut than some had
expected, driving investors to trim bearish bets made on hopes of
more aggressive easing.
The Reserve Bank of New Zealand said a strong kiwi was driving it to
cut rates and that it saw potential for one more reduction by
year-end and another by mid-2017. Traders said that was too slow
relative to expectations with some going into Thursday's meeting
expecting a 50 basis point cut.
As a result, after the quarter point to a record low of 2.0 percent
the New Zealand dollar rose to $0.7351, its highest since May 2015,
before settling back to $0.7240 <NZD=D3>, up 0.7 percent on the day.
"The RBNZ has made it clear for a long time that it wants to see the
kiwi depreciate, sometimes less and sometimes more explicitly," said
Ulrich Leuchtmann, currency strategist at Commerzbank. "Only that it
does not deliver enough to achieve this."
Along with the Australian dollar, the kiwi has been buoyed by the
allure of relatively high bond yields. New Zealand dollar 10-year
government bonds <NZ10YT=RR> have a yield of around 2.1 percent,
compared with negative yields in Japan and Germany.
In the European session, sterling hit a one-month low of $1.2936 <GBP=D4>
amid more signs of weakness in Britain's housing market. Volumes
were limited but traders said the report from the Royal Institute of
Chartered Surveyors added to signs the British economy was slowing,
which have weighed on the pound since June's vote to leave the
Currency markets' broader focus remained on whether U.S. interest
rates will rise this year, with traders looking ahead to a number of
speeches by Federal Reserve officials culminating in Chair Janet
Yellen's Aug. 26 address at the Jackson Hole symposium.
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Reserve Bank of New Zealand dollar notes are pictured in Singapore
June 22, 2006. REUTERS/Dennis Owen
"A Fed rate hike still seems like a long-term prospect ...and we
would expect that the carry-seeking behaviour will continue to
support the Antipodean currencies," analysts at Credit Agricole said
in a note, referring to the Australian and New Zealand dollars.
The U.S. dollar index, which measures its value against a basket of six major
currencies, last traded up at 95.844 <.DXY>, rising from a near one-week low of
95.442 set on Wednesday.
The euro was 0.3 percent weaker at $1.1144 <EUR=>.
Against the yen, the dollar was slightly higher at 101.45 yen <JPY=> in
holiday-thinned trade, with Japanese markets closed for a public holiday.
The greenback rose as high as 102.66 yen on Monday following Friday's strong
U.S. jobs data, but has since lost momentum after weak productivity report meant
inflation pressures are likely to be tame.
(Editing by Raissa Kasolowsky and John Stonestreet)
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