Sharechat Logo

NZ dollar rises on growing inflation expectations, US CPI looms

Wednesday 14th February 2018

Text too small?

The New Zealand dollar rose after the Reserve Bank's survey of expectations showed firms are predicting inflationary pressures, and ahead of US inflation which may offer a steer on the Federal Reserve's interest rate track. 

The kiwi gained to 73.31 US cents as at 5pm in Wellington from 72.77 cents as at 8am and 72.62 cents late yesterday. The trade-weighted index increased to 75.10 from 74.62.

The RBNZ's March quarter survey showed firms lifted their two-year inflation expectations to 2.11 percent from 2.02 percent in the prior period, while one-year inflation expectations remained steady at 1.86 percent. The central bank has signalled it will keep the official cash rate at a record low 1.75 percent until the latter half of next year at the earliest but does keep a close eye on the expectations as they have an impact on wage and pricing setting behaviour. 

"The dollar got quite a bounce from the inflation expectations," Westpac Banking Corp head of NZ strategy Imre Speizer said. It is a "bit of a puzzle" as to why the two-year inflation expectations lifted while the one-year outlook was steady, but Speizer said firms may be factoring in new government initiatives and a revised policy targets agreement, both of which will take some time to have an impact. 

The survey also showed early signs of wage inflation and Speizer said that may have added to the kiwi's bounce. Annual hourly wage growth for one year ahead is seen at 2.48 percent versus 2.25 percent in the prior survey and increases to 2.68 percent in two years from 2.57 percent. 

Investors are now waiting for US inflation data for January. Headline consumer price inflation is forecast to slow to an annual 1.9 percent and core inflation to 1.7 percent. If inflation is higher the greenback should get a solid lift as it will solidify expectations the Federal Reserve will be lifting rates in March.

The kiwi gained to 92.93 Australian cents from 92.29 cents yesterday and increased to 52.66 British pence from 52.46  British pence. It traded at 59.16 euro cents from 59.06 cents, and rose to 4.6425 yuan from 4.5810 yuan but fell to 78.34 yen from 78.82 yen as Japan's currency gained traction against the greenback. 

New Zealand's two-year swap rate fell 1 basis point to 2.14 percent, while 10-year swaps fell 5 points to 3.25 percent. 

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares rise as optimism over US-China trade deal lingers; Fletcher gains
NZD under pressure against Aussie as investors cheered by easing of trade jitters
PFI properties’ valuation rises 5.5% to $1.32 billion
Broader definition of workplace harm in new govt health & safety strategy
MBIE officials grilled on terms of Westland Milk loan
Trade Me suitor Hellman & Friedman drops out
Hydrogen not a short-term option for Huntly - Genesis
Kiwibank says customers have a dwindling need of physical branches
Buying off the plans driving down KiwiBuild cost to govt: HYEFU
Fiscal policy to slow growth over next five years, despite surpluses

IRG See IRG research reports