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NZ dollar slips vs greenback

Friday 19 May 2017 08:39 AM

NZ dollar slips vs greenback, surges vs Brazilian real as politics dominate markets

By Jonathan Underhill

May 19 (BusinessDesk) - The New Zealand dollar declined against the US dollar and surged against the Brazilian real as the behaviour of the American and Brazilian presidents overshadowed concerns about economic fundamentals.

The kiwi dollar fell to 69 US cents as at 8am in Wellington from 69.28 cents late yesterday. The local dollar rose as high as 2.3591 real, the highest level this year, from 2.1743 real yesterday.

Speculation has mounted about the risks to US President Donald Trump of the ongoing Federal Bureau of Investigation probe into links between his team and Russian officials ahead of the election and Trump's subsequent sacking of FBI director James Comey. Focus on the Trump administration comes ahead of the Federal Reserve's policy review next month, which is expected to include a hike in interest rates. Meanwhile, the real tumbled on allegations President Michel Temer condoned bribery payments to a witness in a corruption probe. Temer has vowed not to resign.

"With little on the economic calendar today, US politics is likely to garner more attention than it deserves and impact market sentiment," said Jason Wong, currency strategist at Bank of New Zealand, in a note. "Stronger USD data and a belief that economics will ultimately prevail over politics, as long as there is no crash in markets, have seen Fed pricing for hikes nudge up and a flattening of the US yield curve."

Among the recent evidence the US economy is strong enough to warrant higher interest rates, the Philadelphia Fed business outlook index for May jumped to 38.8 about twice the 18.5 level estimated by economists.

The trade-weighted index fell to 74.87 from 75.06 yesterday. The New Zealand dollar was little changed at 92.85 Australian cents from 92.86 cents.

The kiwi slipped to 62.05 euro cents from 62.17 cents and fell to 53.27 British pence from 53.42. It dropped to 76.85 yen from 77.01 yen and declined to 4.7486 yuan from 4.7745 yuan yesterday.

(BusinessDesk)

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