The New Zealand dollar fell after local firms dialled down their inflation expectations as economic growth slows from its rampant pace at the start of the year, and as US gross domestic product figures loom.
The kiwi dropped to 78.19 US cents at 5pm in Wellington from 78.58 cents at 8am and 78.90 cents yesterday. The trade-weighted index declined to xx from 78.60 yesterday.
New Zealand firms cut their one-year ahead inflation expectations by about 40 basis points to 1.59 percent in the September quarter, and have trimmed their forecasts for local economic growth, according to the Reserve Bank's survey of expectations. The lower forecast may make it easier for the central bank to delay future rate hikes, which are already being questioned as official data shows tepid inflation in the economy.
That comes ahead of the US GDP figures, which will help investors firm up their expectations for the Federal Reserve's shift away from running zero interest policy as the world's biggest economy recovers from the global financial crisis.
"Inflation expectations were lower, and US GDP tonight will direct direction as it gives us an idea of whether the US is raising interest rates any time next year," said Nick Tvedt, senior FX dealer at NZForex in Auckland. "The kiwi's back down to the bottom of the range."
