NZ dollar dips after domestic inflation report still points to flat rate outlook

Thursday 19th April 2018

The New Zealand dollar fell against the greenback after a local data continued to show little domestic inflation, reaffirming expectations rates will stay on hold for some time yet.

The kiwi dollar traded at 73.23 US cents as at 5pm in Wellington versus 73.20 cents at 8am, down from 73.37 cents late yesterday. The trade-weighted index slipped to 74.92 from 75.17.

The consumers price index rose 0.5 percent in the three months to March 31, while annual inflation was 1.1 percent, Statistics New Zealand said. The result was in line with the median of 12 economists surveyed by Bloomberg and compares to the Reserve Bank's quarterly projection of 0.6 percent and 1.1 percent.

Westpac Banking Corp market strategist Imre Speizer said while the kiwi initially edged higher it fell back within 30 minutes given the data didn't change anything for the market, with analysts predicting the official cash rate won't move until next year at the earliest.

"Today’s result reiterates our view that the RBNZ will leave the OCR on hold well into 2019," said ASB Bank chief economist Nick Tuffley. ASB expects the first rate increase to come in 2019.

The kiwi continued to lose ground against the Aussie, trading at 93.77 cents from 94.43 cents yesterday as Australia's currency was buoyed by higher metal prices. The kiwi found support after a disappointing Australian jobs report where the number of people employed rose 4,900 in March, compared with an expected 20,000 rise, Speizer said.

Capital Economics Australia and New Zealand economist Kate Hickie in a note "while the 4,900 rise in employment in March was notably weaker than expected, we are cautious about reading too much into a single months figures given most leading labour market indicators remain consistent with decent rates of employment growth ahead".

The kiwi dollar fell to 4.5866 yuan from 4.6120 yuan yesterday. It traded at 59.13 euro cents from 59.24 cents and at 78.63 yen from 78.70 yen. It rose to 51.56 British pence from 51.28 pence yesterday.

New Zealand's two-year swap rate was unchanged at 2.30 percent and the 10-year swap rate rose 3 basis points to 3.18 percent.

(BusinessDesk)

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