The New Zealand dollar rose against the Australian dollar after domestic terms of trade data surprised on the upside while Australia's private sector capital expenditure fell short of expectations. The kiwi continued to lose ground against the greenback.

The kiwi traded at 93.18 Australian cents as at 5pm in Wellington versus 92.58 Australian cents and from 92.72 cents yesterday. It traded at 72.04 US cents versus 72.24 cents yesterday.

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According to the Australian Bureau of Statistics, capex fell a seasonally adjusted 0.2 per cent in the final quarter of last year versus expectations for a rise of 1 per cent.

The expected spend for 2018/19 came in at A$84 billion ($90b) versus a consensus forecast of $86.5b, which also weighed on the Aussie.


Meanwhile, New Zealand's merchandise terms of trade rose to a record in the fourth quarter after export prices outran imports as the value of trade in both directions rose.

The kiwi benefited against the Aussie when "the capex disappointed slightly and the terms of trade was better," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

The New Zealand dollar continued to fall against the US dollar as the greenback benefited from Federal Reserve chair Jerome Powell's optimistic assessment of the US economy yesterday, which stoked speculation the Fed may be more aggressive in hiking interest rates.

"I would call it just grinding lower," said Kelleher. He said the kiwi has strong resistance at 71.75 US cents, this year's low. "It's going to take a bit of work to get through that," he said.

Looking ahead, markets will be watching for the US January personal consumption expenditure price index or PCE deflator, which has been the Federal Reserve's favored inflation gauge.

According to Dow Jones Newswires, consensus expectations is for the core PCE deflator to stay at 1.5 per cent on year in January, below the Fed's 2 per cent objective for inflation. The upcoming Italian election this weekend will also be closely watched as it could spark political turmoil in the Eurozone.

The trade-weighted index was at 74.39 from 74.40 and the dollar traded at 59.07 euro cents from 59.08 cents yesterday. It traded at 52.37 British pence from 51.97 pence late yesterday. It fell to 4.5661 yuan from 4.5710 yuan and to 76.86 yen from 77.45 yen.

New Zealand's two-year swap rate was unchanged at 2.19 per cent, and 10-year swaps fell 3 basis point to 3.19 per cent.