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NZ dollar pushes higher against greenback ahead of CPI data

Monday 16th July 2018

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The New Zealand dollar pushed higher in Asian trading ahead of tomorrow's inflation data that will be closely watched given chatter about possible rate cuts by the central bank. 

The kiwi traded at 67.74 US cents as at 5pm from 67.58 cents as at 8am in Wellington and 67.63 cents in New York on Friday. The trade-weighted index traded at 72.58 from 72.46 in New York.

The median in a Bloomberg poll of 13 economists expects a 0.5 percent rise in the consumers price index in the second quarter for an annual increase of 1.6 percent while the Reserve Bank tips a 0.4 percent quarterly rise.

While the central bank has indicated that interest rates will remain on hold, recent soft data, including a seven-year low in business confidence, have increased speculation it could move to cut the official cash rate from its record low 1.75 percent. 

According to Kiwibank, "a reading of 0.6 percent or higher will be a solid upside surprise, and get market traders off the (implied) idea of rate cuts near term." 

ASB Bank said, however, that while the sustained lift in global oil prices and recent falls in the kiwi have boosted NZ’s near-term inflation outlook substantially "the lift is more of a one-off than reflecting a rise in inflation pressures from firming domestic capacity pressures. Accordingly, the RBNZ is likely to look through these moves." 

Alex Hill, head of dealing Australasia at HiFX in Auckland, said the kiwi bounced off key support at 67.50 US cents and said with US interest rate increases fully priced in and worst-case scenarios on the trade war front "semi-priced," commodity currencies - such as the kiwi and the Aussie - are primed for a bounce. 

"Technically, these commodity currencies have suffered a lot in the past few months and that sell-off may just be starting to abate and we might be finding some critical support so it looks like there might be room for upside, especially in the short-term," he said.

The kiwi traded at 91.22 Australian cents from 90.84 cents Friday. 

It was at 76.17 yen from 75.76 yen and traded at 51.14 British pence from 50.98 pence. It traded at 57.93 euro cents from 57.78 cents and rose to 4.5314 yuan from 4.5124 yuan.

New Zealand's two-year swap rate fell 2 basis points to 2.12 percent and 10-year swaps fell 1 basis points to 3 percent.


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