(Adds analysts' comments, updates exchange rates)
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Kiwi hits a two-month high after RBNZ raises rates
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Traders bet Fed may not raise rates in May
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Focus switches to Friday's U.S. non-farm payroll
By Ankur Banerjee
SINGAPORE, April 5 (Reuters) - The U.S. dollar was stuck near two-month lows on Wednesday as weak economic data bolstered views that the Federal Reserve is near the end of its tightening cycle, while the New Zealand dollar jumped after a larger-than expected interest rate hike.
New Zealand's central bank raised interest by 50 basis points (bps) to a more than 14-year high of 5.25% in a move that surprised markets, as 22 of 24 economists in a Reuters poll had forecast just a 25 bps hike.
The kiwi rallied 1% to touch a two-month high of $0.6383 after the decision. It was last up 0.55% at $0.635.
Christopher Wong, a currency strategist at OCBC, said the central bank's stance was that near term inflationary pressures have increased and inflation is still too high and persistent, adding the hike brings the tightening cycle closer to an end.
Elsewhere, data overnight showed U.S. job openings dropped to their lowest level in nearly two years in February, suggesting that labour market conditions were finally easing.
Job openings, a measure of labour demand, were down 632,000 to 9.9 million on the last day of February, the monthly Job Openings and Labor Turnover Survey, or JOLTS report, showed. Economists polled by Reuters had forecast 10.4 million openings.
The dollar index, which measures the currency against six peers, eased to a fresh two-month low of 101.43, after dropping 0.5% overnight. It was last at 101.57.
The euro was flat at $1.0953, below the two-month peak it touched on Tuesday. Sterling was last at $1.2483, down 0.13% on the day, easing away from the ten month high it scaled on Tuesday.
"The market is still looking at the U.S. data very closely ... The market is very sensitive to how well the U.S. growth outlook is holding up in light of the banking stress," said Moh Siong Sim, currency strategist at Bank of Singapore.
The softer-than-anticipated U.S. jobs data led to the markets tweaking its outlook for rate hikes. Markets are now pricing in a 59% chance of the Fed standing pat on interest rates at its next policy meeting in May, CME FedWatch tool showed. Markets were pricing in a 43% chance of Fed not raising interest rates a day earlier.
A report last week showed that while inflation ebbed in February, it remained high enough to possibly compel the Fed to raise interest rates one more time this year.