US uncertainty helps to lift kiwi

The kiwi traded at US71.40c at 5pm today versus US71.34c at 8am. Photo / File

The New Zealand dollar is heading for a 0.7 per cent weekly gain, having gone sideways in the local trading session as markets await US inflation data.

The kiwi traded at US71.40c at 5pm today versus US71.34c at 8am, up from US71.04c on Thursday. It traded at US70.92c in New York last week. The trade-weighted index advanced to 75.04 from 74.74 Thursday.

Martin Rudings, senior dealer foreign exchange at OMF in Wellington, said the greenback had been under pressure as markets were still jittery about US President Donald Trump, given ongoing geopolitical and economic risk.

"Generally the backdrop is a dark cloud over the US economy because of Trump," something that is likely to remain, he said. The US dollar was also weighed on this week when minutes from the Federal Open Market Committee's September meeting showed policy-makers held concerns about the strength of inflation in the world's biggest economy.

Markets are now focused on US inflation data due overnight in the US for further clues about how aggressively the Fed will lift rates.

Rudings said an easing in the greenback over September may have "brought out a little bit of inflation" and if the number is higher than expected the dollar could get a lift. The data is predicted to show the annual pace of inflation accelerating to 2.3 per cent.

Domestically, investors are waiting to see if NZ First will back a National-led or Labour-led government. NZ First leader Winston Peters confirmed that his party's board would meet with the party's nine-MP caucus on Monday to decide which of the two major parties to support to form a government. He expected to make an announcement after that meeting.

The kiwi rose to A91.09c from A90.86c on Thursday and gained to 4.6952 Chinese yuan from 4.6794 yuan. It increased to 80.08 yuan from 79.81 yuan on Thursday and advanced to 53.77p from 53.59p. The local currency gained to 60.24 euro cents from 59.82c on Thursday.