NZ dollar falls as US inflation bolsters Fed hike case

The kiwi was at 65.46 US cents at 8am in Wellington, from 65.38 cents at the New York close and 66.44 cents at 5pm on Friday.

The New Zealand dollar weakened amid US dollar strength after upbeat US inflation data cemented expectations the Federal Reserve will hike interest rates this week.

The kiwi fell to 67.56 US cents at 8am in Wellington, from 67.88 cents at 5pm yesterday. The trade-weighted index declined to 73.67 from 73.77 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, soared after a report showed the US core consumer price index rose 2 percent in the year through November, the largest gain since May 2014. That stoked expectations that the Fed will hike interest rates for the first time in nearly a decade, increasing the lure of the US dollar.

A lower-than-expected rise in prices at the GlobalDairyTrade auction overnight also weighed on the kiwi.

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"US CPI supports expectations of a Fed rate hike, with market pricing nudging back up to 78 percent," ANZ Bank New Zealand senior foreign exchange strategist Sam Tuck and rural economist Con Williams said in a note. "The US dollar broadly strengthened."
The Fed is due to release its decision at 8am New Zealand time tomorrow.

ANZ said the dairy auction undershot expectations with the average winning prices increasing 1.9 percent to US$2,458, lagging behind expectations for a 6 percent gain, while the average whole milk powder price rose 1.8 percent to US$2,304 a tonne, compared with expectations for a 9 percent lift.

In New Zealand today, third-quarter current-account data is released at 10:45am.
ANZ expects the kiwi to trade between 66.80 US cents and 68.20 cents today.
The New Zealand dollar advanced to 93.90 Australian cents from 93.46 cents yesterday, advanced to 44.89 British pence from 44.76 pence, gained to 61.90 euro cents from 61.63 cents, edged up to 82.27 yen from 82.13 yen, and fell to 4.3644 yuan from 4.3885 yuan.