Kiwi falls ahead of US CPI, Spencer speech

ANZ senior economist Philip Borkin says "An upside surprise could lead to some currency volatility."

(BusinessDesk) - The New Zealand dollar fell ahead of US inflation data, which may provide clues to the pace of US rate hikes, while domestically traders will be watching for a speech by acting Reserve Bank governor Grant Spencer and February food prices.

The kiwi declined to 72.93 US cents as at 8am in Wellington from 73.23 cents late yesterday. The trade-weighted index fell to 74.71 from 75.03.

US consumer price inflation excluding food and energy may have slowed to 0.2 percent in February for an unchanged year-on-year rate of 1.8 percent, based on economist surveys. The data comes after employment figures last Friday showed slower-than-expected wage growth, which had traders questioning whether the Federal Reserve will hike three times or four this year. The Federal Open Market Committee meets next week.

"An upside surprise (and what that could potentially suggest for Fed tightening) could lead to some currency volatility," said Philip Borkin, senior economist at ANZ Bank New Zealand, in a note.

In the interest rate market, the focus is on the pricing for the Debt Management Office's 2029 bond syndication, with initial guidance at 16 to 19 basis points over the 2027 nominal bond. Borkin said ANZ's fair value estimate is for a spread of 16 basis points. He also said the DMO may sell $2 billion of the debt, the top end of its $1.5 billion to $2 billion range, and he expects "solid" demand.

The yield on the April 2027 government bond was last at 3.02 percent.

Today Spencer is due to give a speech entitled 'Getting the best out of macroprudential policy', while the food price index for February is due out at 10:45am. In Australia, the NAB business confidence survey for February will be in focus.

The kiwi fell to 77.56 yen from 78.05 yen yesterday and declined to 92.60 Australian cents from 93.06 cents. It fell to 59.09 euro cents from 59.39 cents and declined to 52.43 British pence from 52.81 pence. The local currency fell to 4.6143 yuan from 4.6333 yuan.


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