Kiwi up after Wheeler cools on currency talk, soft Australian inflation

The New Zealand dollar gained against the greenback after Reserve Bank governor Graeme Wheeler backed away from talking tough on the currency, while weaker than expected Australian inflation pushed the cross-rate in the local currency's favour.

The kiwi rose to 84.40 US cents at 5pm in Wellington from 84.06 cents at 8am, up from 83.94 cents yesterday. The currency rose to 82.32 Australian cents from 81.97 cents yesterday.

The Reserve Bank kept the benchmark rate unchanged at 2.5 percent as expected, though traders anticipated Mr Wheeler would take a tougher stance on the currency than just calling it "overvalued and higher than projected", having previously said a rate cut could be in the pipelines if it stayed strong for no particular reason.

"By leaving out the reference to a potential OCR cut if the kiwi stayed high, the implication is he's less concerned about it," says Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "That suggested it was an experiment that didn't work and they won't go there again."

Mr Speizer expects the kiwi will head lower over the next few sessions after a "brief pop" today.

The local currency gained against its transTasman counterpart after Australian consumer prices rose at a slower than expected pace than expected.

The consumer price index was up 0.4 percent in the first three months of the year, according to the Bureau of Statistics, less than the 0.7 percent pace economists were picking.

New Zealand has become a more attractive destination for investor funds than its neighbour, with better returns on offer and the prospect of rising interest rates.

The yield on New Zealand's 10-year government bond was 3.21 percent at 5pm in Wellington, 8 basis points higher than its Australian counterpart, even though the central bank-set cash rate is lower.

With Australian and New Zealand markets closed tomorrow for Anzac Day, investors will be looking overseas for direction ahead of US gross domestic product figures on Friday in Washington.

The kiwi climbed to 83.41 yen from 82.87 yen yesterday and rose to 55.39 British pence from 54.96 pence. The trade-weighted index rose to 78.21 from 77.65 yesterday and the kiwi advanced to 64.94 euro cents from 64.33 cents

(BusinessDesk)