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NZ dollar holds above US68c as greenback rallies on rising US inflation

Thursday 14th February 2019

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The New Zealand dollar held above 68 US cents, paring some of yesterday's gain, as higher-than-expected US inflation was seen as giving the Federal Reserve scope to raise interest rates. 

The kiwi slipped to 68.09 US cents as at 8am in Wellington from 68.44 cents yesterday. The local currency jumped by about 1 US cent yesterday after the Reserve Bank kept its bias towards raising the official cash rate, albeit half a year later than previously projected. The trade-weighted index decreased to 73.97 from 74.16 yesterday. 

The US dollar index rose 0.4 percent to 97.1 after Bureau of Statistics figures showed US core inflation rose at a 2.2 percent annual pace in January, just above expectations. While the Fed has said it will be patient in assessing whether to raise rates, underlying inflation was still seen by some analysts as high enough to support an increase. The yield on US 10-year Treasuries rose 2.5 basis points to 2.71 percent. 

Investor sentiment was also relatively upbeat on optimism over the US trade delegation to Beijing, where it's hoped US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will make headway in ending the deadlock. The Standard & Poor's 500 index was up 0.3 percent in late trading. 

"Kiwi pared some of its rally after positive US inflation data gave the greenback a boost," ANZ Bank New Zealand economists Liz Kendall and Sandeep Parekh said in a note. 

Reserve Bank governor Adrian Orr is appearing before Parliament's finance and expenditure committee today after yesterday delivering a less dovish monetary policy statement than expected. ANZ has been one of the more aggressive forecasters in predicting a lower OCR and retained its view that a cut will eventually be needed. 

Local data today include January house sales figures and food prices. 

The kiwi traded at 95.87 Australian cents from 95.96 cents yesterday and fell to 4.6034 Chinese yuan from 4.6186 yuan. It decreased to 75.54 yen from 75.70 yen yesterday and was little changed at 60.38 euro cents from 60.34 cents. It traded at 52.94 British pence from 53.03 pence yesterday. 

(BusinessDesk)

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