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NZ dollar little changed ahead of inflation data, after gains in dairy prices

Wednesday 18th April 2018

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The New Zealand dollar was little changed ahead of figures tomorrow that are expected to show inflation remains tepid and will give the Reserve Bank no reason to contemplate interest rate hikes.


The New Zealand dollar was trading at 73.39 US cents as at 8am in Wellington from 73.38 cents late yesterday. The trade-weighted index was at 75.18 from 75.17.


Economists expect annual inflation was 1.1 percent in the first quarter, slowing from a 1.6 percent pace three months earlier. That's also the forecast of the Reserve Bank, which is projecting its first rate increase in 2020. The kiwi didn't move much after dairy product prices rose at the Global Dairy Trade auction, gaining for the first time in five events, amid strong demand. The GDT price index increased 2.7 percent and whole milk powder rose 0.6 percent to US$3,311 a tonne. 


"The NZD is again one of the underperformers overnight, although at 0.7340 it remains towards the upper end of its trading range this year," said Nick Smyth, interest rate strategist at Bank of New Zealand. "The focus shifts to CPI, released tomorrow, and given signs that speculative positioning in the NZD seems to have shifted net long, we think the NZD is probably vulnerable to a downside surprise." 'Long' refers to bets that a currency will rise.


The kiwi dollar fell to 4.6086 yuan from 4.6105 yuan yesterday, when data showed China's economy grew 6.8 percent, year-on-year, in the first quarter, while industrial production grew 6 percent, missing estimates.


The local dollar rose to 51.36 British pence from 51.16 pence as figures showed the UK jobless rate was 4.2 percent in February, versus expectations for a rate of 4.3 percent. Average weekly earnings rose 2.8 percent, year-on-year, as expected.


The New Zealand dollar traded at 94.45 Australian cents from 94.48 cents yesterday. It traded at 59.30 euro cents from 59.26 cents and at 78.53 yen from 78.57 yen.



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