NZ dollar climbs after bouncy night

File photo / NZ Herald

The New Zealand dollar firmed against the US dollar today following indications the United States Federal Reserve may restart easing monetary policy.

It was a bouncy night offshore for the kiwi before the Federal Open Market Committee (FOMC) issued its minutes. The kiwi was buying US75.47c at 8am and climbed to US75.68c at 5pm, compared with US74.96c at 5pm yesterday.

BNZ markets strategist Mike Jones said this morning's FOMC minutes provided markets with the green light to keep selling the US dollar.

"The minutes essentially confirmed the market's supposition the Fed is mulling a return to monetary easing. Indeed, the FOMC noted that if inflation remained subdued 'it would be appropriate to provide additional monetary policy accommodation'," Mr Jones said in a market commentary.

Westpac economists this afternoon predicted that on Monday New Zealand's official annual inflation would hit a 10-year low of 1.3 per cent, and third quarter inflation would be 0.9 per cent after absorbing administrative increases in alcohol excise, local-body rates and the July 1 introduction of the Emissions Trading Scheme.

Their forecast for the quarter is slightly below the Reserve Bank's 0.9 per cent pick.

"If we are correct, news that inflation was below the RBNZ's forecast and hit a 10-year low can only compound the down-beat tone in interest rate markets. There could be a distinct interpretation in foreign exchange markets, where policies tending towards inflation are being punished," the bank's economists said.

The New Zealand dollar edged up today against its aussie counterpart to A76.68c from A76.51c at 8am and A76.57c at 5pm yesterday.

It also gained against the euro to 0.5422 at 5pm from 0.5403 a day earlier and against the yen to 61.95 from 61.38.

The trade weighted index rose to 67.14 from 66.70.

- NZPA