The New Zealand dollar declined to a week-low after data yesterday showed inflation accelerated at a slower than expected pace in the third quarter, suggesting interest rates may stay at current levels for longer.
The kiwi fell as low as 78.05 US cents, and was trading at 78.18 cents at 8am in Wellington, from 78.52 cents at 5pm yesterday and 79.09 cents immediately before the inflation data release yesterday morning. The trade-weighted index declined to 76.25 from 76.47 yesterday.
New Zealand consumer prices are accelerating at an annual rate of 1 percent, lagging the Reserve Bank's 1.3 percent forecast and at the bottom of the bank's 1-to-3 percent target band. Lower inflation means the Reserve Bank will probably hold off raising the official cash rate until late 2015, according to economists.
"The NZD/USD dropped like a stone yesterday morning after the release of NZ Q3 CPI," Kymberly Martin, Bank of New Zealand senior market strategist, said in a note. "The low-side reading has caused the market to further reduce OCR expectations."