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Kiwi falls ahead of inflation figures

NZ Newswire logoNZ Newswire 4 days ago Jonathan Underhill

The New Zealand dollar has fallen ahead of second-quarter inflation data which is expected to come in weaker than the Reserve Bank has forecast and giving it little reason to contemplate raising interest rates anytime soon.

The kiwi traded at US73.16 cents on Tuesday morning in Wellington, down from US73.30c late Monday. The trade-weighted index slipped to 77.85 from 77.97.

Economists expect inflation was 0.2 per cent in the three months ended June 30, for an annual rate of 1.9 per cent, according to the median in a poll of 15 economists surveyed by Bloomberg.

That would be below the central bank's projection of inflation of 0.3 per cent in the second quarter for an annual rise of 2.1 per cent. The figures may dispel speculation the RBNZ would be encouraged to hike rates in keeping with central banks such as Canada's.

"We see the data reinforcing the RBNZ's decisively neutral policy stance for some time," said BNZ currency strategist Jason Wong

"If anything, inflation is tracking below the bank's projections, given the combination of a stronger NZD and lower oil prices since the May MPS."

Traders will be watching for the release of the minutes of the Reserve Bank of Australia's latest meeting on Tuesday and then Fonterra's GlobalDairyTrade auction.

Nigel Brunel, director of financial markets at OMF says that based on the direction of skim milk and whole milk powder (WMP) futures on the NZX, he expects the GDT Index to be "to be slightly up led by WMP."

On Tuesday morning, the kiwi slipped to 63.70 euro cents from 63.93c late Monday and fell to 82.37 yen from 82.53 yen. It fell to 4.9515 yuan from 4.9615 yuan and rose to 56.04 British pence from 55.97p. It traded at 93.85 Australian cents from A93.81c.

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