Kiwi hits a twomonth high after RBNZ raises rates
Traders bet Fed may not raise rates in May
Focus switches to Friday39;s U.S. nonfarm payroll

LONDON, April 5 Reuters The dollar wallowed near twomonth lows on Wednesday after weak data supported the view that the Federal Reserve may not need to raise rates much further, while the New Zealand dollar hit twomonth highs after a largerthan expected rate hike.

With the allimportant U.S. monthly employment report just two days away, activity across the market was a little more subdued than it has been in recent weeks.

The Reserve Bank of New Zealand unexpectedly raised interest rates by 50 basis points bps to a more than 14year high of 5.25. In a Reuters poll, 22 of 24 economists had forecast just a 25 bps hike.

The kiwi rallied by as much as 1.1 to a twomonth high of 0.6383 after the decision, before retreating. It was last up 0.1 at 0.6316.

The outperformance of the kiwi overnight the RBNZ never failing to surprise to the hawkish side that really is the main theme, other than everything is trading in a range, which is what we39;d expect a few days before a key U.S. data release, Adam Cole, chief currency strategist at RBC Capital Markets, said.

New Zealand now has the highest interest rates from among the G10, surpassing both the U.S., where rates are at 5, and Canada, where they are at 4.50.

In theory, this creates an opportunity for traders to borrow in a lowyielding currency such as the yen to fund lending in…