NZ dollar edges up ahead of CPI data as fears ease over Goldman charges

Tuesday 20th April 2010

The New Zealand dollar rose ahead of figures today that are expected to show inflation is accelerating and after reports the U.S. Securities and Exchange Commission was split in its vote to pursue fraud charges against Goldman Sachs Corp.

US stocks gained on reports the SEC voted three-to-two in favour of chasing Goldman Sachs for allegedly failing to disclose securities it sold that were linked to the sub-prime market were chosen by a hedge fund manager who then bet their value would drop. Stocks on Wall Street were also buoyed by better-than-expected first quarter earnings by Citigroup Inc., with the Dow Jones Industrial Average up 0.7%.

The Consumer Price Index probably grew 0.6% in the first three months of the year, for an annual rate of 2.3%, according to a Reuters survey. The inflation data is the final clue for traders looking ahead to next week’s central bank review of interest rates.

“CPI is all the focus today for the markets today ahead of the Reserve Bank meeting next week,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia. “It’s pretty strongly priced in so it would have to be something quite a way from the mean to move the kiwi.”

The kiwi rose to 70.97 US cents from 70.68 cents yesterday, and increased to 65.79 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.66. It gained to 65.54 yen from 64.94 yen yesterday, and slipped to 76.78 Australian cents from 77.04 cents. It edged down to 52.56 euro cents from 52.60 cents yesterday, and fell to 46.24 pence from 46.47 pence.

Kelleher said the currency may trade between 70.50 US cents and 71.25 cents today, though a rogue CPI number could push it out of this range. It was less volatile than its trans-Tasman counterpart as investors were using the Australian dollar for the carry trade with its better yields and stronger economy, he said.

“The kiwi isn’t attracting interest and won’t until it starts moving yields higher,” Kelleher said. “The Aussie’s basically got more liquidity and higher yields,” he said, referring to the Australian currency colloquially.

European markets are beginning to feel the fall-out from the volcano eruption in Iceland, with some 63,000 flights cancelled and more than 3,000 airports still closed. The International Air Transport warned the economic impact could be worse than the September 11 terror attacks.

The eruption also delayed a meeting between Greek and International Monetary Fund officials to discuss the debt-stricken nation drawing on a rescue package put forward by the European Union and IMF last week.

09:15:09

Businesswire.co.nz

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