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NZ dollar falls to one-week low vs British pound after BoE's Carney says next move is up

30 Mar 2015

The New Zealand dollar fell to a one-week low against the British pound after Bank of England governor Mark Carney said the next move in interest rates would be an increase, despite record low inflation.

The kiwi touched 50.68 British pence, and was trading at 50.71 pence at 8am in Wellington, from 51.03 pence at 5pm on Friday. The local currency was at 75.52 US cents from 75.58 cents at the New York close and 75.81 cents on Friday.

BoE governor Carney, speaking as part of a panel discussion at a Bundesbank conference in Frankfurt on Friday, reiterated that "the next move in interest rates is going to be up". In comments to The Times newspaper on Friday, one of the bank's deputy governors, Ben Broadband, also downplayed low inflation. The comments come after the bank's chief economist Andy Haldane surprised some investors in a speech to a business club the previous week by saying the sharp slowdown in inflation meant the bank could move in either direction.

"Sterling outperformed, following comments from BoE governor Carney that the next move in rates is likely to be up," ANZ Bank New Zealand senior economist Philip Borkin and senior FX strategist Sam Tuck said in a note. "After a strong end to last week, the British pound will be driven today by the net consumer credit release where expectations are for a marginal increase. However, Sterling's fate lies with the Markit PMI on Wednesday."

The kiwi may trade between 50.50 British pence and 51.30 pence today, ANZ said.

In New Zealand this week, traders will be eyeing the latest GlobalDairyTrade auction early Thursday morning, where prices may decline after Fonterra Cooperative Group said it would add more volume following higher-than-expected milk production.

New Zealand building consent data for February is due tomorrow, while housing data is due Thursday. Markets will be closed on Friday for the Easter public holiday.

The New Zealand dollar touched 97.75 Australian cents over the weekend, close to its post-float record of 97.82 cents reached earlier this month. It was trading at 97.46 Australian cents at 8am from 97.13 cents on Friday.

The local currency slipped to 69.38 euro cents from 69.67 cents on Friday and weakened to 90.08 yen from 90.43 yen. The trade-weighted index was at 79.02 from 79.16 on Friday.

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