Sharechat Logo

NZ dollar holds gains as inflation heightens anticipation of rate hike, dairy prices rise

Wednesday 22nd January 2014

Text too small?

The New Zealand dollar held yesterday's gains after a surprise rise in December inflation heightened expectations the Reserve Bank might hike interest rates as early as next week and as the latest Fonterra Cooperative Group dairy auction showed an increase in prices.

The kiwi traded at 83.09 US cents at 8am from 83.21 cents yesterday, holding on to most of yesterday's gain. The trade-weighted index decreased to 78.91 from 79.09.

Traders are pricing in a 46 percent chance the Reserve Bank will lift its 2.5 percent official cash rate when it reviews policy next week after government figures yesterday showed consumer prices rose 0.1 percent in the December quarter against expectations of a 0.1 percent decline. That kept the kiwi dollar supported on the prospect of higher interest rates, and a rise in dairy prices at the GlobalDairyTrade auction underpinned the view of New Zealand's strengthening economy.

"We need to see some RBNZ action before you'd expect to see any strength in the kiwi, and it can trade between 82 US cents and 84 cents until Thursday" next week when the bank reviews policy, said Sam Tuck, senior FX strategist at ANZ New Zealand. "External events, such as the US recovery, would be the main driver once we know the hiking cycle has started."

Australian inflation data today is expected to show consumer prices rose 0.5 percent in the December quarter, and investors will also be looking at a consumer confidence survey for any indication of an economic revival across the Tasman.

ANZ's Tuck said the kiwi dollar is likely to find support against its Australian counterpart until the Reserve Bank meeting next week. The local currency traded at 94.30 Australian cents at 8am in Wellington from 94.40 cents yesterday.

The kiwi fell to 86.576 yen from 87.06 yen yesterday ahead of the Bank of Japan's policy review, which is expected to keep the status quo.

The local currency declined to 50.42 British pence from 50.64 pence ahead of UK employment figures which are expected to show a decline in the unemployment rate, and minutes to the Bank of England's last meeting. It slipped to 61.29 euro cents from 61.42 cents yesterday.

 

BusinessDesk.co.nz



  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:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report