The New Zealand dollar fell after the Organisation of Petroleum Exporting Countries agreed to extend production curbs that didn't go as far as the market had expected, driving down the price of crude oil and weighing on commodity-linked currencies.
The kiwi fell to 70.23 US cents as at 8am in Wellington from 70.41 cents late yesterday. The trade-weighted index was little changed at 75.95 from 75.98.
OPEC and producers such as Russia agreed overnight to extend curbs on oil output of 1.8 million barrels a day to the end of March 2018, less than some oil traders had deemed enough to alleviate a glut of crude oil. Brent crude dropped 4.7 per cent to US$51.37 a barrel and the CRB Index of 19 commonly traded commodities fell 1.5 per cent. The Australia and Canadian dollars also declined.
While the agreement to extend production curbs "was widely anticipated, some had expected further reductions in production to offset the soaring output from US shale producers," said Jason Wong, currency strategist at Bank of New Zealand. "Commodity currencies have suffered as a result."
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The kiwi and local interest rates didn't move much after Budget 2017 was announced yesterday including the Treasury's forecast for New Zealand's economic growth to peak in 2019 at an annual pace of 3.9 per cent, spurred on by strong migration and a heavy construction pipeline.
The pace of economic growth filled the government's coffers more than expected, giving Finance Minister Steven Joyce room to return cash to taxpayers through higher income thresholds for the lowest tax bands while spending the rest in a $32.5 billion infrastructure pipeline over the next four years.
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The kiwi rose to 94.15 Australian cents from 93.84 cents yesterday and fell to 4.8215 yuan from 4.8373 yuan. It was little changed at 62.63 euro cents and traded at 54.23 British pence from 54.21 pence. The local currency traded at 78.48 yen from 78.56 yen.