Friday 21 April 2017 08:38 AM
NZ dollar unwinds inflation jump as Fed's Kaplan sticks to rate hike view
By Paul McBeth
April 21 (BusinessDesk) - The New Zealand dollar unwound most of yesterday's gain from faster-than-expected inflation as
Dallas Federal Reserve president Robert Kaplan affirmed his view that the world's biggest central bank will lift rates
another two times this year, stoking demand for the greenback.
The kiwi fell to 70.12 US cents as at 8am in Wellington from 70.37 cents yesterday. The trade-weighted index declined to
76.17 from 76.47 yesterday.
The local currency jumped about a third of a US cent yesterday after local data showed the consumer prices index rose at
a faster pace than anticipated, raising the prospect the Reserve Bank may have to hike interest rates earlier than
expected. However, that rally was short-lived as comments from the Fed's Kaplan that three rate hikes this year was a
"good baseline" and could be adjusted depending on the economic data added to the view that the US central bank was on
track to deliver higher interest rates.
"The kiwi is back on the back foot, and only a few pips above where it was pre-CPI yesterday, thanks to USD strength
overnight," ANZ Bank New Zealand senior rates strategist David Croy said in a note. "It’s difficult to argue that the
kiwi should be stronger given that we expect growth to tail off this year, and as the US economy builds momentum and
policy there normalises, but equally, it’s difficult to be bearish given New Zealand’s respectable credentials."
With no local data today, investors will continue to take their cues from overseas leads.
The kiwi slipped to 65.42 euro cents from 65.58 cents yesterday as the latest poll for the French presidential election
showed independent Emmanuel Macron leading far-right National Front candidate Marie Le Pen. The local currency fell to
54.70 British pence from 54.93 pence with the sterling on the rise since UK Prime Minister Theresa May called a snap
election to secure a stronger mandate to negotiate her country's exit from the European Union.
The kiwi was almost unchanged at 76.67 yen from 76.65 yen yesterday after Bank of Japan governor Haruhiko Kuroda told
Bloomberg the central bank has no plans to slow its quantitative easing programme.
The New Zealand dollar fell to 93.13 Australian cents from 93.70 cents yesterday and declined to 4.8243 Chinese yuan
from 4.8439 yuan.
(BusinessDesk)
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