The New Zealand dollar fell before the release of US consumer prices for June, amid speculation inflation in the world's biggest economy may have accelerated enough to bring forward the timing of interest rate hikes.
The kiwi traded at 86.74 US cents at 5pm in Wellington, from 86.89 cents at the start of the day and from 87.12 cents yesterday. The trade-weighted index declined to 80.77 from 81.05 yesterday.
US consumer prices rose at an annual pace of 2.1 percent in June, unchanged from a month earlier, according to a Reuters survey. That would keep the gain at its fastest since October 2012. The US data comes ahead of the Reserve Bank of New Zealand's review of the official cash rate on Thursday, which is expected to see the OCR lifted a quarter point to 3.5 percent, compared to near zero for the Federal Reserve.
"If US CPI ticks up there could be a significant move up in the US dollar," said Tim Kelleher, head of institutional FX sales at ASB Bank. The kiwi "is looking a little bit defensive ahead of Thursday."
Kelleher expects RBNZ governor Graeme Wheeler, in raising the OCR, may also warn that the currency is over-valued given weaker prices for key New Zealand commodities such as dairy and logs.
