KEY POINTS:
A large fall in consumers price inflation, and growing expectations of a big interest rate cut next week, pushed the New Zealand dollar down a US cent today.
The Consumers Price Index fell 0.5 per cent in the three months to December, the largest quarterly decrease in a decade, taking the annual inflation rate to 3.4 per cent, beating the 3.6 per cent forecast in a Reuters poll.
Economists now expect the Reserve Bank to cut official interest rates by 1 percentage point to 4 per cent on January 29, and more to come.
By 5pm, the kiwi was at US53.44c, a cent above its 8am level and well below the US55.37c at 5pm yesterday.
Against the aussie, the kiwi had fallen to A80.59c from A81.07c late yesterday. The kiwi was lower against the yen and euro, but a touch firmer against sterling.
The currency was likely to slide below the US52.80c and US51.90c support levels, Westpac senior market strategist Imre Speizer said.
"The CPI data was the second major release of the new year, and its weakness, compared to expectations, is a sign of things to come in Q1," Mr Speizer said.
"We expect much of the data this quarter to surprise on the downside, and that can only be negative for the NZD."
Other data out this week includes November retail sales on Wednesday, and December credit card transactions.
Sterling hit a seven-year low against the US dollar today, compounding losses from the previous day when Royal Bank of Scotland recorded the biggest loss in British corporate history and sent European shares down.
The euro also extended its fall, having dropped sharply on Monday's ratings downgrade of Spain by Standard & Poor's and grim economic forecasts from the European Commission.
US financial markets were closed on Monday for Martin Luther King Day, before the inauguration of Barack Obama as president on Tuesday.
Currency rates:
NZ dlr/US dlr US53.44c US55.37c
NZ dlr/Aust dlr A80.59c A81.07c
NZ dlr/euro 0.4104 0.4140
NZ dlr/yen 48.26 50.29
NZ dlr/stg 37.38p 37.16p
NZ TWI 53.64 54.70
Aust dlr/US dlr US66.34c US68.25c
Euro/US dlr 1.3026 1.3364
US dlr/yen 90.33 90.81
- NZPA
