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NZ dollar dips as iron ore prices rise

NZ NewswireNZ Newswire 25/10/2016 Paul McBeth

The New Zealand dollar fell against its trans-Tasman counterpart as higher iron ore prices bolstered demand for the Aussie ahead of Australian inflation data.

The kiwi slipped to 93.59 Australian cents at 8am in Wellington from 93.79 cents on Tuesday, extending its decline for a third day. It was little changed at 71.58 US cents from 71.48 cents, buoyed by the Australian dollar's strength.

The Australian dollar rose 0.5 per cent to 76.44 US cents as iron prices climbed 6 per cent on the Dalian Commodity Exchange, the daily limit for the bourse. The Aussie has been supported by recent gains in hard commodity prices, though Wednesday's consumer price index will be a key indicator for traders.

Core inflation is expected to be 0.4 per cent in the September quarter, and while Reserve Bank of Australia governor Philip Lowe has said he doesn't plan to move rates further, a weak number could cause investors to question that stance.

"The AUD has been the best performing major currency for the month to date, even surpassing the strength of the USD, reflecting the general lift in commodity prices," BNZ's Jason Wong said.

"A weaker outturn for the core rates of, say, 0.2 per cent would add fuel to further RBA rate cut expectations and lead to a stronger NZD/AUD cross."

The British pound slumped on an investment bank reporting stating the currency was overvalued by 10 per cent, though it later recovered when Bank of England governor Mark Carney told policymakers the currency's weakness was due to perceptions about the future of UK economic output in relation to the Brexit. The kiwi rose to 58.74 British pence from 58.46 pence.

The local currency was little changed at 65.70 euro cents from 65.72 cents after European Central Bank president Mario Draghi defended the bank's monetary policy and said it hadn't been hurting German households.

The kiwi traded at 74.60 yen from 74.66 yen and increased to 4.8537 Chinese yuan from 4.8435 yuan. The trade-weighted index was little changed at 77.08 from 77.04.

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