NZ dollar rises above 71 US cents for first time in 3 months after weak US data

Wednesday 31st May 2017

The New Zealand dollar rose above 71 US cents for the first time since early March after weak US data raised doubts about further Federal Reserve interest rate hikes after one expected in June.

The kiwi dollar traded at 70.94 US cents as at 8am in Wellington, and earlier touched 71.01 cents, from 70.46 US cents late yesterday. The trade-weighted index rose to 76.69 76.31 yesterday.

The US core PCE price deflator rose 1.5 percent year on year, meeting market expectations but also the lowest annual inflation in about 18 months, while the Conference Board measure of consumer confidence fell for a second month in May. Locally, the release of the Reserve Bank's financial stability report at 9am will be an early focus for traders.

"Despite inflation heading in the opposite direction to the Fed’s target, the market still has high conviction that the Fed will hike rates next month," said Jason Wong, currency strategist at Bank of New Zealand, in a note. "But beyond June the outlook becomes murkier and the Fed funds curve only has a modest upward slope."

Wong said no surprises were expected from the stability report. "This rarely moves the market. Risks in the dairy sector have faded, but the housing

market likely still remains an area of concern for the bank," he said.

Out later today is ANZ's business confidence survey for May.

The kiwi traded at 95.05 Australian cents from 94.88 cents late yesterday. The kiwi traded at 63.36 euro cents from 63.33 cents and rose to 4.8618 yuan from 4.8283 yuan. It rose to 55.19 British pence from 54.99 pence and rose to 78.60 yen from 78.12 yen.

(BusinessDesk)

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