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NZ dollar heads for 0.4% weekly gain; greenback poised for more strength

The New Zealand dollar is heading for a 0.4 percent gain against the greenback this week, ahead of what might be an extended rally for the US currency as the prospects for the world's biggest economy remain strong.

The kiwi rose to 75.48 US cents at 5pm in Wellington from 75.18 cents on Friday in New York last week. It traded at 75.31 cents at 8am, and was down from 75.63 cents yesterday. The trade-weighted index increased to 78.42 from 78.26 yesterday, and is heading for a 0.4 percent weekly gain from 78.12 last Friday.

A BusinessDesk survey of 13 currency strategists and advisers on Monday predicted the kiwi would trade between 73.20 US cents and 77 cents this week. Eight expected the currency to decline, four predicted it would gain and one bet it would remain relatively unchanged.

The US dollar index, a measure of the greenback against a basket of currencies, climbed to a five-week high as inflation and durable orders figures beat forecasts and stoked expectations the Federal Reserve will have to raise interest rates at some point. Testimony by Fed chair Janet Yellen this week sent mixed messages to investors, as she said any rate hikes would depend on the strength of economic data. The second estimate for fourth-quarter US gross domestic product is expected to show the world's biggest economy grew at an annualised pace of 2 percent, according to a Bloomberg survey.

"US dollar strength is really poised to go again for another strong push, and last night was the beginning of it," said Martin Rudings, senior dealer foreign exchange at OMF in Wellington. "The kiwi's the one that'll go down kicking and screaming, but will probably go up on the trade-weighted index."

New Zealand's currency has been a favourite among investors because of the nation's relatively high interest rates. The Reserve Bank is only given an 8 percent chance of cutting the 3.5 percent official cash rate at its next policy meeting in March, whereas its Australian counterpart is given a 54 percent chance of lowering its 2.25 percent cash rate when it next meets on Tuesday.

The local currency gained to 96.78 Australian cents from 96.25 cents yesterday, and advanced to 4.7322 Chinese yuan from 4.7108 yuan.

The kiwi was little changed at 90.01 yen at 5pm in Wellington from 89.95 yen yesterday, and climbed to 67.29 euro cents from 66.52 cents, with Europe's common currency bearing the brunt of the US dollar strength.

The local currency increased to 48.89 British pence from 48.64 pence yesterday.

New Zealand's two-year swap rate increased to 3.55 at 5pm in Wellington from 3.535 yesterday, and the 10-year swap rate rose to 3.725 from 3.6975.