NZ dollar rises ahead of CPI

The New Zealand dollar gained before figures expected to show inflation is tame enough to rule out any immediate increase in interest rates and as traders digested weaker US retail sales and a cut to forecast global growth by the International Monetary Fund.

The kiwi dollar slipped to 79.69 US cents from 79.51 cents at 5 pm in Wellington yesterday. The trade-weighted index was little changed at 72.31.

Inflation was 0.5 per cent in the second quarter, unchanged from the first-quarter pace, for an annual rate of 1.1 per cent, according to a Reuters survey.

Some economists are predicting the consumers price index will drop below the central bank's 1 per cent-to-3 per cent annual rate in the third quarter. Meantime, US retail sales fell 0.5 per cent in June, the third monthly drop, and the IMF cut its global growth forecast for next year to 3.9per cent from 4.1 per cent. Growth in 2012 was kept at 3.5 per cent.

"Sentiment towards the USD is the key driver of NZD/USD at present," said Mike Jones, currency strategist at Bank of New Zealand. "However, today's CPI figures could spur some near-term volatility."

The market is also awaiting testimony by Federal Reserve chairman Ben Bernanke, though the prospect of an extension to monetary easing is deemed unlikely.

"We'll likely get a firmer guide on USD direction from Fed chairman Bernanke tonight," Jones said.

Shares in the US fell as weaker US retail sales signalled the world's biggest economy is struggling to pick up pace. The Dow Jones Industrial Average was down 0.4 per cent.

The New Zealand dollar edged up to 77.75 Australian cents from 77.74 cents yesterday ahead of the release of the Reserve Bank of Australia's board meeting minutes.

The kiwi slipped to 50.98 British pence from 51.07 pence and fell to 64.93 euro cents from 64.96 cents. The local dollar slipped to 62.80 yen from 62.89 yen.