Erratic kiwi claws back over US73c

The New Zealand dollar held onto its overnight gains but was headed for a 0.8 per cent weekly decline as investors await several US economic indicators, including inflation numbers.

The kiwi was trading at US73.16c at 5pm yesterday from US72.84c late on Thursday but was weaker versus last Friday, when it traded at US73.80c.

The NZ dollar was battered early in the week by disappointing domestic data but gained sharply towards the end of the week amid speculation the Reserve Bank may be more inclined to hike interest rates in the face of increases and bullish talk from other central banks including the Bank of Canada. It is also benefiting from US dollar weakness as signs the Federal Reserve will pursue only a gradual rate tightening path weigh on the greenback after Senate testimony from Federal Reserve chair Janet Yellen.

Looking ahead, investors were awaiting a host of US economic indicators, including core inflation, retail sales and industrial production for June for more insight into how the Fed might proceed.

The CPI, in particular, will garner interest because “if you take Yellen at her word, the Fed i s starting to second guess itself as to whether recent weakness is transitory”, said ANZ Bank New Zealand senior economist Phil Borkin.

The next key risk will be domestic inflation next week, he said. “Petrol is weighing on inflation numbers around the world and that’s the case for New Zealand, too, so it’s really what the details show,” he said.

The kiwi rose to € 64.13c from € 63.69c late on Thursday and traded at 56.48 British pence from 56.47p. The kiwi slipped to A94.50c from A94.62c.

The two- year swap rate rose 1 basis point to 2.26 per cent while the 10- year swaps rose 3 basis points to 3.35 per cent.