The New Zealand dollar, which fell to a five-month low yesterday on confirmation interest rates are set to stay low, rose overnight after US inflation came in lower than economists were expecting.
The kiwi dollar rose to 69.63 US cents as at 8am in Wellington from 69.12 cents late yesterday. It fell as low as 69 cents yesterday. The trade-weighted index rose to 72.73 from 72.44.
The US dollar index fell about 0.3 percent after the US consumer price index rose 0.2 percent in April, missing estimates of a 0.3 percent gain and stoking speculation the Federal Reserve won't need to speed up its pace of raising interest rates this year. The kiwi dollar rallied against the pound after the Bank of England cut its projections for economic growth and inflation while keeping borrowing costs unchanged.
"The currency regained some ground overnight as US CPI undershot market expectations," said Con Williams, rural economist at ANZ Bank New Zealand, in a note. The kiwi gained against the pound after the BoE "held rates and Governor (Mark) Carney flipped to the more dovish side."
The New Zealand dollar traded at 92.40 Australian cents, holding near the three-month low it reached yesterday of 92.30 cents and rose to 88.86 Canadian cents from 88.76 cents late yesterday. It fell to a three-month low 88.44 cents yesterday following the RBNZ statement.
New Reserve Bank governor Adrian Orr kept the official cash rate at 1.75 percent yesterday and said the direction of the next move is equally balanced and could be up or down. Its forecasts were downgraded with inflation seen returning to 2 percent - the midpoint of the RBNZ's 1 percent-to-3 percent target range - in December 2020 versus a prior forecast of September 2020. The RBNZ also predicts the OCR will rise to 1.9 percent in December 2019, having previously forecast an increase in June 2019. A full rate increase is still signalled by March 2020 when the benchmark rate is forecast to be 2 percent.
In New Zealand today, traders will be watching for economic figures for April - real estate prices, food prices and the performance of manufacturing index.
The local currency rose to 4.4173 yuan from 4.3973 yuan and lifted to 76.17 yen from 75.83 yen. It traded at 58.39 euro cents from 58.24 cents.