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NZ dollar jumps on inflation data

NZ Newswire logoNZ Newswire 26/01/2017 Rebecca Howard

© Bloomberg The New Zealand dollar gained on Thursday as investors were cheered by stronger-than-expected inflation data although some profit-taking capped gains.

The kiwi rose to 72.84 US cents from 72.47 US cents at 8am in Wellington and 72.44 cents late on Wednesday. It touched 73.12 after data was released which showed the consumer price index rose 0.4 per cent in the December quarter for an annual increase of 1.3 per cent.

Economists polled by BusinessDesk had been picking a quarterly pace of 0.2 per cent for an annual increase of 1.2 per cent, while the RBNZ's own forecast was for consumer prices to rise 0.2 per cent in the December quarter for an annual increase of 1.1 per cent. It marks the first time inflation is back in the central bank's 1-3 per cent target band in two years.

"The market was always going to react to the topside if the CPI number was better than expected and that's exactly what it did," said ASB's Tim Kelleher.

He said the market has now completely given up on the idea of a rate cut in New Zealand and the data was a clear contrast to Australia where the CPI was weaker-than-expected.

The trade-weighted index was at 79.42 from 79.18 after touching a high of 79.76.

Kelleher noted when the TWI hovered close to 80.00 the move was tempered by some profit taking, in particular in the Kiwi-Aussie cross and said there could be more upside to come but the Kiwi remains contained within recent ranges. Against the greenback, he said the range is 68.50 to 73.50 while it is 93.50 to 97.50 against the Aussie.

The kiwi rose to 96.14 Australian cents from 96 cents, it increased to 5.0099 Chinese yuan from 4.9816 yuan, gained to 67.68 euro cents from 67.50 cents , fell to 57.59 British pence from 57.80 pence, but picked up against the Japanese yen, rising to 82.53 yen from 82.27 yen .

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