NZ dollar falls to nine-day low after slower than expected inflation
By Paul McBeth
April 16 (BusinessDesk) - The New Zealand dollar dropped to a nine-day low after slower than expected inflation raised
questions over the track of rising local interest rates.
The kiwi fell as low as 85.79 cents, trading at 85.86 cents at 5pm in Wellington from 86.39 cents at 8am and 86.50 cents
yesterday. The trade-weighted index dropped to 79.75 from 80.27 yesterday.
New Zealand’s consumers price index slowed to an annual increase of 1.5 percent in the three months ended March 31, from
1.6 percent in the December period, and below the Reserve Bank’s forecast. The tradable sector, which covers goods and
services facing international competition, kept a lid on imported prices, while housing underpinned rising prices.
Still, traders have priced in a 97 percent chance the Reserve Bank will hike the official cash rate a quarter-point to 3
percent next week as governor Graeme Wheeler continues to try and head off building inflation pressures in the economy.
“The currency is acting as a shock absorber, and I can’t see it going too far while the RBNZ is actively reducing policy
stimulus, increasing New Zealand’s yield advantage compared to the rest of the world,” said Sam Tuck, senior FX
strategist at ANZ Bank New Zealand in Auckland. “Every time the market has tried to take the kiwi down, it comes back
smelling of roses.”
The inflation figures followed another decline in dairy prices at Fonterra Cooperative Group’s GlobalDairyTrade auction
to a 14-month low. The GDT price index dropped 2.6 percent to US$4,047 a tonne, from US$4,124 a tonne two weeks ago, the
fifth straight decline and the lowest since February 2013.
China’s economy grew at a faster than expected annual pace of 7.4 percent in the March quarter, according to government
figures, easing fears the world’s second-biggest economy and Australia and New Zealand’s biggest trading partner is
slowing down.
Traders will be watching for a speech from Federal Reserve chair Janet Yellen to the New York Economic Club on Wednesday
in the US, the release of the Fed’s beige book and the Philadelphia Fed’s business survey. UK unemployment and the Bank
of Canada policy review will also be eyed.
The kiwi fell to 91.63 Australian cents at 5pm in Wellington from 92.10 cents yesterday, and dropped to 87.73 yen from
88.15 yen. It declined to 62.15 euro cents from 62.60 cents yesterday, and decreased to 51.35 British pence from 51.74
pence.
(BusinessDesk)