Dollar falls to nine-day low after slower than expected inflation

Free audio stream, including stories that are padlocked on our site. Listen on any device, anywhere. Updated twice daily. The audio stream takes several seconds to start on Android devices.

Launch Radio player

 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)


This article is tagged with the following keywords. Find out more about MyNBR Tags

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7562 0.0026 0.35%
AUD 0.9677 0.0021 0.22%
EUR 0.6759 0.0028 0.42%
GBP 0.4898 0.0008 0.16%
HKD 5.8645 0.0194 0.33%
JPY 90.4760 0.4940 0.55%

Commods

Commodity Price Change Time
Gold Index 1209.6 4.680 2015-02-26T00:
Oil Brent 60.0 0.310 2015-02-26T00:
Oil Nymex 48.3 -2.720 2015-02-26T00:
Silver Index 16.6 0.150 2015-02-26T00:

Indices

Symbol Open High Last %
NZX 50 5861.7 5878.5 5861.7 0.29%
NASDAQ 4985.0 4989.2 4987.9 -0.49%
DAX 11337.1 11401.7 11327.2 0.66%
DJI 18224.4 18239.4 18224.6 -0.06%
FTSE 6949.7 6967.2 6949.7 -0.04%
HKSE 24902.6 25102.0 24902.1 -0.32%
NI225 18844.3 18865.4 18785.8 0.06%