KEY POINTS:
The New Zealand dollar headed higher today despite inflation being on, or slightly below, expectations.
The CPI rose 0.7 per cent rise in the March quarter, taking the annual inflation rate to 3.4 per cent.
The quarterly and annual increases were bang on Reserve Bank forecasts, while the median forecasts in a Reuters poll of economists had been for rises of 0.8 per cent for the quarter and 3.5 per cent for the year.
The kiwi fell when the headline was flashed on screens but once details were revealed, it climbed and dealers said it had an underlying bid tone at the close.
It ended the session on US79.20c against its US78.98c opening and yesterday's US78.73c close.
It held steady against the Australian dollar at A85.25c through the day but was slightly down from yesterday's A85.45c close.
However, the aussie had a weaker tone after minutes of the central bank's policy board indicated the tightening phase may be on hold.
The board said it believed financial conditions had tightened significantly and domestic demand was cooling when it met this month, reinforcing speculation interest rates had likely peaked.
Provided a consumer spending moderation continued, members expect inflation to decline, though they recognised that there were significant risks in both directions, the minutes said.
An Auckland dealer said there was no glimmer of hope that the New Zealand central bank would take a similar view. It would grind the economy into the ground first, he opined.
In major markets, concerns about the US economy and fresh doubts about credit markets are offsetting the support for the US dollar from the Group of Seven financial heads' strongest expression in seven years about volatility in major currencies, traders said.
After meeting late last week, the G7 nations said they were worried that sharp currency moves could undermine economic and financial stability. But traders were sceptical those words would translate into co-ordinated currency intervention to prop up the dollar.
Reuters currency rates:
NZ dlr/US dlr US79.20c US78.73c
NZ dlr/Aust dlr A85.25c A85.45c
NZ dlr/euro 0.5005 0.5012
NZ dlr/yen 80.25 79.46
NZ dlr/stg 40.10p 39.93p
NZ TWI 70.32 70.10
Australian dollar US92.54c US92.15c
Euro/US dollar 1.5822 1.5709
US dollar/yen 101.32 100.96
- NZPA
