* New Zealand c. bank holds rates steady, wrongfoots
investors
* Hedge funds had built up massive short bets against the
dollar
* Dollar firms on risk-off sentiment; Powell testimony eyed
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
LONDON, Nov 13 (Reuters) - The New Zealand dollar provided
the standout performance in otherwise unremarkable currency
markets on Wednesday as it stood set to notch its biggest daily
gain in a year after the central bank stunned investors by
keeping interest rates on hold.
Hedge funds and banks had built up massive short positions
in the kiwi NZD=D3 as the local dollar is known before the
rate decision on bets that a protracted trade war between
Washington and Beijing would hurt the export-oriented economy's
prospects.
But after two rate cuts this year, the Reserve Bank of New
Zealand said it saw no urgency to ease policy again, sending the
dollar up by more than 1% and short-dated bond yields and swap
rates surging higher. "Like much of the market, we had expected an RBNZ cut
today," UBS strategists said in a daily note.
"Signs of progress in U.S.-China trade talks have soothed
global markets and policymakers alike," they said expecting the
local dollar to strengthen to $0.63 by end-2019.
Against a broadly firm greenback, the kiwi was up 1.3% at
$0.6407, comfortably on track for its biggest daily jump since
end-October 2018.
Almost all analysts had forecast a cut in the 1% benchmark
rate to a record-low 0.75%. Futures markets had priced in a
better-than-75% chance of a cut as slack spending and a global
slowdown held New Zealand's economic growth at a six-year low.
Elsewhere, the U.S. dollar remained broadly firm against a
basket of its rivals .DXY as weak risk appetite, partly due to
the intensifying unrest in Hong Kong, raised the greenback's
safe haven appeal.
It edged 0.1% higher at 98.41, holding just below a
one-month high of 98.423 hit in the previous session, with
market focus turning towards a two-day testimony by U.S. Federal
Reserve chief Jerome Powell later in the day.
The British pound GBP=D3 remained broadly steady around
the $1.2840 line as latest opinion polls forecast a lead for the
ruling Conservative Party.
NZ dollar https://tmsnrt.rs/33KFCIO
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