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NZ dollar heads for 1% weekly gain as economic outlook picks up

The New Zealand dollar is heading for a 1 percent weekly gain against the greenback as recent data and upbeat dairy auctions paint a strong picture of the local economy, and after minutes to the last Federal Reserve policy meeting raised questions about when the US central bank will hike interest rates.

The kiwi rose to 75.29 US cents at 5pm in Wellington from 74.52 cents on Friday in New York last week. It was little changed from 75.19 US cents at 8am, and down from 75.64 cents yesterday. The trade-weighted index fell to 78.12 from 78.36 yesterday, and is heading for a 1.2 percent weekly gain from 77.16 last week.

A BusinessDesk survey of 11 strategists and advisers on Monday picked the kiwi to trade between 73.20 US cents and 77 cents this week. Ten said the local currency would rise while one expected it to stay broadly unchanged.

Whole milk prices at Fonterra Cooperative Group's GlobalDairyTrade auction rose for a second event this week, stoking optimism New Zealand's biggest export commodity will continue to support the economy. That's fed into a series of upbeat data showing robust growth, sapping expectations New Zealand's Reserve Bank will follow its Australian counterpart in cutting interest rates. Meantime, minutes to the January Fed policy meeting were more dour than expected, and raised fears the US central bank will keep rates near zero for longer than anticipated.

"The kiwi had fallen quite far, quite fast on the basis that rate cuts would come quite imminently, but it was clear that wasn't going to be the case, and it would be a case of data watching," said Raiko Shareef, currency strategist at Bank of New Zealand in Wellington. "The data's been really good, we've had a couple of good dairy auctions in terms of price, so those factors have meant the kiwi has outperformed its peers over the past couple of weeks."

BNZ's Shareef said the currency faces strong resistance at 76.10 US cents, and he expects the recent rally to come to an end.

Fed chair Janet Yellen's testimony before legislators next week will be keenly watched for any update on when the central bank plans to raise interest rates. While the Fed minutes this week were more pessimistic than expected, the policy meeting occurred before stronger-than-expected employment figures, which might have allayed some of the central bank's fears.

The local currency reached a new post-float record against the Australian dollar at 97.07 cents, and was trading at 96.39 cents at 5pm in Wellington from 96.54 cents yesterday.

Chinese banks remained closed for the Spring Festival holiday. The kiwi fell to 4.7116 Chinese yuan from 4.7329 yuan yesterday. It declined to 89.52 yen from 89.71 yen.

The local currency was little changed at 66.26 euro cents from 66.23 cents yesterday. Investors are watching Europe for any conclusion to reports Germany has rejected a Greek bailout extension proposal because it doesn't meet criteria set by Greece's Eurozone partners.

The kiwi edged down to 48.81 British pence from 48.96 pence yesterday.

The two-year swap rate increased to 3.575 at 5pm in Wellington from 3.56 yesterday, and the 10-year swap rate advanced to 3.815 from 3.77.