The New Zealand dollar fell against its Australian counterpart overnight as expectations of an interest rate rise in this country next week diminished.
A 0.2 per cent fall in the December quarter Consumer Price Index, published yesterday, is widely seen as reducing the chances of Reserve Bank governor
Alan Bollard hiking rates next week.
Against the Australian dollar, the kiwi dropped from US88.80c to US88.25c within minutes of the CPI announcement. It reached a low against the aussie near A87.70c around 6am today before regaining some ground to be buying A87.99c around 8.15am.
The fall will be some relief for exporters after the kiwi reached a 10-month high against the aussie in late-December, topping A89.60c.
The ANZ bank today said market expectations that the Reserve Bank would raise the Official Cash Rate next week had fallen substantially.
There was "very heavy" selling of the cross against the aussie overnight, ensuring topside resistance was not broken and support at A88c had given way, ANZ said.
Further falls on the cross were likely, as a result of "misplaced expectations", as participants in the market looked to the Reserve Bank of Australia's next interest rate decision on February 7.
Against the US dollar, the kiwi was buying US69.18c around 8.15am from US69.17c at 5pm yesterday. Against the euro it was at 0.5347 from 0.5352, and against the yen at 83.49 from 83.62. The trade weighted index was at 68.74 from 68.84.
ANZ said the CPI result had fuelled a fall in the NZ dollar through support at US69.35c and despite yield-related buying it had been unable to move back above that level.
The US dollar slipped against European currencies overnight after a batch of solid US economic data did little to shake expectations the Federal Reserve would keep interest rates steady for some time.
Against the yen, the dollar was little changed ahead of the Bank of Japan's (BOJ) monetary policy decision on Thursday. The yen had been under recent pressure as expectations for a rise in interest rates from the BOJ faded following media reports it was unlikely to act this week.
- NZPA
