NZ dollar declines as Fed's Yellen keeps alive Dec rate hike

NZ dollar declines as greenback touches fresh highs following Yellen speech

By Tina Morrison

Dec. 3 (BusinessDesk) - The New Zealand dollar declined as the greenback touched fresh highs after Federal Reserve chair Janet Yellen cemented expectations the central bank is gearing up to lift its target interest rate for the first time since 2009 at its meeting this month.

The kiwi slipped to 66.39 US cents at 8am in Wellington, from 66.63 cents at 5pm yesterday. The trade-weighted index fell to 72.16 from 72.29 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, touched 100.510, its highest level since April 2003, after Yellen, in a speech to the Economic Club of Washington, kept alive the prospect of rate hikes at the Fed's Dec. 15-16 meeting. Traders are now awaiting the closely watched US non-farm payrolls report tomorrow, after a stronger than expected ADP Research Institute employment report yesterday.

Yellen "has made it clear the Fed is keen get started on policy normalisation, even if the pace will be very slow," Bank of New Zealand senior market strategist Kymberly Martin said in a note. "She worries that to delay would lead to abrupt tightening that could inadvertently push the economy into recession. The market is back to pricing almost a 75 percent chance of a hike this month."

Traders will be looking for further confirmation of Yellen's view when she testifies to US lawmakers today.

In New Zealand today, Auckland real estate agency Barfoot & Thompson is due to release its latest monthly house price data and Statistics New Zealand publishes third-quarter building work data.

The New Zealand dollar fell to 90.77 Australian cents from 91.05 cents yesterday, ahead of Australia's October trade data today.

The local currency slipped to 62.53 euro cents from 62.75 cents yesterday as traders await the outcome of today's European Central Bank meeting where further stimulus is expected to be announced.

The kiwi advanced to 44.41 British pence from 44.22 pence yesterday, declined to 81.91 yen from 81.95 yen, and fell to 4.2481 yuan from 4.2625 yuan.

(BusinessDesk)

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