By Rebecca Howard
Sept. 12 (BusinessDesk) - The New Zealand dollar dipped after US producer price's lifted in August but was largely
treading water ahead of the European Central Bank rate decision due overnight.
The kiwi was trading at 64.15 US cents at 7:50 am in Wellington from 64.30 cents at 5pm. The trade-weighted index was at
71.31 from 71.41.
The US Bureau of Labor Statistics reported that the PPI for final demand rose 0.1 percent in August and rose 1.8 percent
in the 12 months through August. Economists polled by Reuters had expected a flat result in August and a 1.7 percent
annual increase.
However, the lift in the US dollar was capped by near-term rate expectations.
"Despite this inflation measure coming in stronger than expected, the Federal Reserve is still expected to cut interest
rates next week – a decision the market has now fully priced in," said ANZ Bank FX/rates strategist Sandeep Parekh.
Risk appetite - and the kiwi - was also supported by news that China is granting tariff exemptions for 16 types of
American-made products as a sign of goodwill ahead of the next round of trade talks. The tariffs were slated to be
imposed on Sept. 17 and the exemption is valid for a year.
"All eyes will be on the ECB tonight as departing president Mario Draghi fronts his second to last meeting. The market
is expecting a strong stimulatory package," said Parekh. Interest rates are expected to drop 10 to 20 basis points and
quantitative easing worth 30 billion to 50 billion euros per month is expected, along with a tiered deposit rate and
dovish forward guidance, he said.
The kiwi was trading at 58.27 euro cents from 58.16.
Domestically investors will be keeping an eye on the August food price index for any signs of inflation.
The kiwi was trading at 93.49 Australian cents from 93.51, at 52.01 British pence from 52.00, at 69.16 yen from 69.24
and at 4.5645 Chinese yuan from 4.5710.
(BusinessDesk)
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