The New Zealand dollar fell over half a US cent with inflation figures expected to confirm there is little pressure on the Reserve Bank to raise interest rates this year.
The New Zealand dollar fell to 81.45 US cents at 8am from 82.16 cents yesterday at 5pm. The trade weighted index decreased to 72.72 from 73.27 yesterday.
An increase in the government excise on tobacco probably drove up the consumer price index in the first quarter, masking a benign inflation outlook that gives the Reserve Bank little reason to raise interest rates this year. The market is pricing in a 0.6 percent increase in the quarterly pace of inflation.
"If the figure is on expectations then you are likely to see the kiwi come under further downside pressure," said Alex Sinton, senior dealer at ANZ New Zealand. "It leaves the New Zealand dollar vulnerable to a flat number."
In March, Reserve Bank Governor Alan Bollard held the official cash rate at 2.5 percent saying the strength of the kiwi dollar would keep interest rates lower for longer. Traders are betting central bank will hike the rate by just 4 basis points over the next 12 months, according to the Overnight Index Swap curve.
