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NZ dollar extends gain on reduced chances of rate cut

Thursday 24th January 2019

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The New Zealand dollar extended yesterday’s gains on the reduced risk of an early rate cut by the Reserve bank.

The kiwi was trading at 67.90 US cents at 8:30am, from 67.66 cents late yesterday. The trade-weighted index climbed to 73.66 from 73.46.

The local currency rose yesterday after December quarter inflation data came in at the upper end of expectations. The Consumers Price Index rose 0.1 percent for the quarter with the annual pace holding steady at 1.9 percent.

Economists had forecast a zero to 0.1 percent December quarter outcome.

“The 1.9 percent reading puts inflation close to the RBNZ’s mid-point of a 1-3 percent target range and combined with our strong employment data - the other half of the RBNZ’s dual mandate - mitigates the possibility of an interest rate cut,” broker HiFX said in a note to clients today.

Overseas equity markets were generally weaker as US-China trade tensions, and efforts to devise a second Brexit deal for the UK rumble on. The S&P500 was marginally weaker; the FTSE-100 was down 0.9 percent.

Goldman Sachs has given 50 percent odds of a “later, softer Brexit”, with Brexiteers and some Labour MPs more accepting about an extension to the March 29 deadline if it results in a more durable deal.

The kiwi dollar fell to 51.94 British pence, from 52.24 pence late yesterday, and firmed to 59.60 euro cents from 59.55.

In Asia, the Bank of Japan yesterday left rates unchanged as expected. It trimmed its inflation projections for the next two years but raised its growth projections marginally.

Governor Haruhiko Kuroda warned of growing risks to the economy if the US-China trade dispute proves drawn out.

Data yesterday showed Japan’s exports fell the most in more than two years in December, dragged down by plummeting shipments to China.

The New Zealand dollar is trading at 95.07 Australian cents, from 94.83 cents late yesterday. It was at 74.40 Japanese yen, from 74.21, and at 4.6102 Chinese yuan from 4.5911.

(BusinessDesk)

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