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NZ dollar gains as soft US inflation clouds Fed's rate hike outlook

The kiwi rose to 67.24USc at 8am in Wellington.

Paul McBeth
Tue, 29 Mar 2016

The New Zealand dollar gained as slower inflation in the US in the US prompted traders to dial back the timing of further Federal Reserve interest rate hikes.

The kiwi rose to 67.24USc at 8am in Wellington from 66.84USc at 5pm yesterday and 66.82USc on Friday in New York. The trade-weighted index advanced to 71.71 from 71.52 last week.

The US dollar index, a measure of the greenback against a basket of currencies, fell after the PCE deflator, the Fed's preferred measure of inflation, rose 1 percent in February from a year earlier, slowing from a pace of 1.3 percent. Traders are assessing how aggressively the Fed will raise interest rates after it embarked on a tightening cycle last year as the US economy remains in good heart, even as global commodity prices remain weak and financial markets are volatile.

"The USD has traded lower in the early hours of this morning after the release of data showing the US Fed's preferred inflation measure (the PCE deflator) slipped," Bank of New Zealand market strategist Kymberly Martin said in a note. "The US dollar declined along with US short-end yields, as the market ponders prospects for further Fed rates hikes this year."

Investors will continue to monitor Fed officials' rhetoric, which has largely been talking up the strength of the economy, and chairwoman Janet Yellen will deliver a speech today in New York. US employment data on Friday will also be closely watched.

The local currency gained to 89.14Ac  from 88.92 cents yesterday and climbed to 4.3740 Chinese yuan from 4.3533 yuan. It increased to 60.01 euro cents from 59.87 cents yesterday and was little changed at 47.18 British pence from 47.28 pence. The kiwi rose to ¥76.16 from ¥75.92 yesterday.

(BusinessDesk)

Paul McBeth
Tue, 29 Mar 2016
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NZ dollar gains as soft US inflation clouds Fed's rate hike outlook
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