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NZ dollar little changed ahead of US CPI, seen as key to December rate hike

Monday 13th November 2017

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The New Zealand dollar was little changed against the greenback ahead of US inflation data this week that will help determine the likelihood of a US rate hike next month.

The kiwi traded at 69.29 US cents as at 8am in Wellington from 69.28 cents in late New York trading on Friday. The trade-weighted index was at 73.58 from 73.51.

Traders have priced in more than an 80 percent chance of a hike by the Federal Reserve at its meeting next month, which would be the third increase this year. Still, economists say October inflation figures on Wednesday in the US, expected to show core inflation of 1.7 percent, will have a bearing on expectations.

"Views toward a December Fed hike will be tested with the October CPI important this week," said Con Williams, rural economist at ANZ Bank New Zealand, in a note. "A miss on core expectations, at 1.7 percent, could cause some pause for thought."

The kiwi traded at 90.42 Australian cents from 90.59 cents on Friday in New York and up from 90.23 cents in Asia at the end of last week. Australia's coalition government has been reduced to a minority after Liberal MP John Alexander resigned after being found to have dual citizenship with the UK.

The US dollar ended the week a tad weaker after the University of Michigan consumer confidence survey fell to 97.8 from 100.8 and amid signs US President Donald Trump's tax reforms may stall. Meanwhile, news that 11 nations, excluding the US, have broadly agreed to a replacement deal to the Trans-Pacific Partnership may buoy currencies of nations heavily dependent on exports, including the kiwi. 

"The export community will be cheering the tentative support shown by the new government and 10 other nations to the revamped TPPA, or also now known as CPTPP," Williams said.

The local currency fell to 4.6008 yuan from 4.6074 yuan on Friday in the US. It traded at 52.51 British pence from 52.61 pence and at 59.38 euro cents from 59.50 cents. The kiwi fell to 78.62 yen from 78.78 yen.


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