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NZ dollar up after weak Aussie inflation

NZ Newswire logoNZ Newswire 25/01/2017 Rebecca Howard
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The New Zealand dollar gained strongly against the Australian dollar after fourth-quarter inflation was weaker than expected across the Tasman but was unchanged against the greenback as markets continued to adopt a wait-and-see attitude toward US President Donald Trump.

The kiwi rose to 96 Australian cents in Wellington from 95.50 cents late on Tuesday, the highest in a month.

The local currency was trading at 72.44 US cents as at 5pm from 72.39 cents at 8am and 72.44 cents late Tuesday.

Wednesday's data from the Australian Bureau of Statistics showed the consumer price index (CPI) rose 0.5 per cent in the fourth quarter, from the previous quarter, missing forecasts of a 0.7 per cent increase.. The annual pace did pick up to 1.5 per cent, from 1.3 per cent, but again undershot expectations.

"We have had a particularly strong day against the likes of the Australian dollar which under-performed on some slightly weaker than expected CPI numbers," said ANZ's Philip Borkin. "That helped drive the TWI up," he said.

The strong kiwi/Aussie cross pushed the trade-weighted index to 79.18 from 78.96.

He said it was difficult to envisage the kiwi falling much against the Australian dollar, at least in the short term. "I think things are certainly improving in Australia ... but at this stage, New Zealand is still shining ahead."

Borkin said there was no major data overnight that might push the kiwi around although markets would continue to watch for any clarity from Trump.

Thursday's domestic CPI data will be the next driver, where economists are expecting inflation to move back into the central bank's 1 per cent to 3 per cent target band for the first time in more than two years.

The kiwi rose to 4.9816 Chinese yuan from 4.9622 yua, gained to 67.50 euro cents from 67.29 cents, edged down to 57.80 British pence from 57.83 pence and lifted to 82.27 yen from 81.60 yen.

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