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The New Zealand dollar surged to its highest level in more than a year on Thursday after the Reserve Bank of New Zealand cut interest rates as expected, disappointing some who had been betting on more aggressive easing.

The New Zealand dollar rose to as high as $0.7351, its highest level since May 2015, before settling back to stand at $0.7265, up 1.1 percent from late U.S. trade on Wednesday.

The Reserve Bank of New Zealand cut interest rates a quarter point to a record low of 2.0 percent on Thursday and flagged the need for more cuts as it struggles to head off deflation risks.

The kiwi jumped as there had been some speculation that it might cut interest rates by 50 basis points, said Steven Dooley, currency strategist for Western Union Business Solutions in Melbourne.

Along with the Australian dollar, the kiwi has been buoyed by the allure of its relatively high bond yields.

"At the moment we're really in a super-charged market when it comes to high-yielding currencies... Everyone's looking for an opportunity to buy," Dooley said.

New Zealand dollar 10-year government bonds NZ10YT=RR have a yield of around 2.1 percent, compared with negative yields in Japan and Germany.

Currency markets broader focus remained on whether the Federal Reserve will raise U.S. interest rates this year, with investors looking ahead for clues from Fed Chair Janet Yellen's speech on Aug. 26 at the U.S. central bank's annual symposium in Jackson Hole, Wyoming.

The dollar index, which measures the greenback's value against a basket of six major currencies, last traded at 95.691 .DXY =USD, holding within sight of a near one-week low of 95.442 set on Wednesday.

The euro held steady at $1.1172 , having gained 0.7 percent so far this week.

Against the yen, the dollar edged up 0.2 percent to 101.41 yen in holiday-thinned trade, with Japanese markets closed on Thursday for a public holiday.

The greenback had risen to as high as 102.66 yen on Monday, in the wake of last Friday's strong U.S. jobs data, but has since lost momentum.

One factor that has helped support the yen and weighed on the dollar recently is Japan's trade surplus, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

"Yen-buying has been increasing because of an improvement in the (Japanese) trade balance," Okagawa said.

Japan recorded a trade surplus of 1.8 trillion yen in the first half of 2016, after posting deficit of nearly 1.1 trillion yen in the second half of 2015, according to Japanese finance ministry data released in late July.

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