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The New Zealand dollar shot up on Thursday after the central bank held official cash rates at record lows but sounded less dovish than bears in the market had wagered on. Some had expected the Reserve Bank of New Zealand (RBNZ) to do more to talk down a resurgent kiwi which had gained 3 percent since May. But it only said a lower exchange rate "would help rebalance the growth outlook."
"The Governor did not say that a lower currency was 'needed' for rebalancing to occur. This subtler approach was arguably a surprise to some investors," Citi economist Josh Williamson said. The New Zealand dollar jumped to $0.7280 immediately after the statement, but was still far from a four-week peak of $0.7320 touched last week. It was last up 0.4 percent at $0.7248.
"The statement was arguably slightly less dovish than some investors were expecting," said Williamson who is tipping the next rate move to be a hike in the first quarter of 2018. The central bank reiterated its policy would be accommodative for a "considerable period," after the economy grew a disappointing 0.5 percent in the first quarter. Even so, the RBNZ was optimistic about the outlook, citing low interest rates and the 2017 Budget which would help boost family income and infrastructure spending.
New Zealand's economy has been among the best performing advanced economies in recent years. Across the Tasman Sea, the Australian dollar was back at $0.7549 and near one-week lows, after failing repeatedly at the $0.7630 mark. The Aussie had been on an uptrend since the beginning of June but a drop in commodity prices last week saw it falter after touching a 2-1/2 month high of $0.7636.

Copyright Reuters, 2017

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