Weaker Aussie inflation gives kiwi a boost

The New Zealand dollar rose, mainly reflecting a retracement against the Australian dollar following weaker-than-expected Australian inflation data on Wednesday.

The kiwi was trading at US66.43c at 5pm yesterday from US66.21c at 8am and rose to A94.56c from A94.42c. The trade-weighted index rose to 72.56 points from 72.39.

“It’s just the market digesting those inflation numbers and re-evaluating the balance,” said Mitchell McIntyre, a dealer at XE. “The pressure’s on the Reserve Bank of Australia to cut rates, or more so than before,” he said.

Australia’s headline inflation rate came in flat for the March quarter against expectations of a 0.2 per cent increase, according to a Bloomberg survey. The annual rate of 1.3 per cent was the weakest since the third quarter of 2016.

“The kiwi has done better in the short term — the kiwi/aussie had been sold off very aggressively and was due for a retracement,” McIntyre said.

Earlier this month, New Zealand inflation figures for the March quarter also missed expectations, raising the likelihood that our central bank will also cut interest rates next month. “But both the kiwi and the aussie are definitely well and truly in a downtrend and that’s likely to continue,” McIntyre said. The kiwi is just “taking a breath in a downtrend. I wouldn’t expect it to go too much higher — it’s going to run into trouble between here and US67c”, he said.

The New Zealand dollar was trading at

51.49 British pence from 51.35, at 59.65 euro cents from 59.47, at 74.18 Japanese yen from

73.92 and at 4.4741 Chinese yuan from

4.4637.

The New Zealand two-year swap rate rose to 1.6312 per cent from 1.6002 on Wednesday — New Zealand and Australian financial markets were closed on Thursday for the Anzac Day holiday.

The 10-year swap rate climbed to 2.1950 per cent from 2.1775.