NZ dollar mixed after consumer price index data

File photo / NZH

The New Zealand dollar eased today even though consumer price index (CPI) data for the December quarter was in line with market expectations.

The CPI rose 2.3 per cent in the December quarter, influenced by the rise in goods and services tax on October 1, Statistics New Zealand (SNZ) said. For the year to the December quarter, the CPI rose 4 per cent, the largest annual increase since the year to September 2008.

The NZ dollar was US76.34c at 5pm, down from US77.23c at 8am and US77.41c at 5pm yesterday. It had climbed to around US77.85c early today and dropped ahead of the CPI as equity markets weakened.

BNZ currency strategist Mike Jones said there was little reaction in the currency market immediately after the CPI data was released but as the session progressed the NZ dollar moved slightly lower.

"A small fall in interest rate yields provided some headwind for the currency," he said.

The weakness was most noticeable in trading in the Australian cross rate but the NZ dollar later rose again on this crossrate.

Against the Australian dollar, the NZ dollar fell to A76.72c, down from A77.13c at 5pm yesterday.

Mr Jones said the market consensus was for a 2.4 per cent rise in the quarterly CPI and BNZ had been expecting a 2.5 per cent.

"It is not a game changer for us. It doesn't change our view of when the next rate cut is going to be," Mr Jones said.

ASB said today's CPI result adds to the recent soft activity data and points to little urgency for the Reserve Bank of New Zealand (RBNZ) to resume the reduction of monetary policy stimulus.

"We expect the RBNZ will wait until the September meeting to lift the official cash rate, and retain the same cautious tone in the January official cash rate review statement next Thursday," ASB economists said.

Otherwise messages have been mixed in currency markets.

Indications that solid Chinese demand was being maintained without rampant inflation had under-pinned growth sensitive currencies such as the NZ and Australian dollars in trading on Wednesday night.

Today official data showed China's economy grew at a rate of 9.8 per cent in the fourth quarter and inflation eased to 4.6 per cent in December from a year earlier. The numbers were in line with earlier leaks.

But global stock markets were weak today, indicative of a cooling in risk appetite, following a terrible profit announcement from investment banking and securities firm Goldman Sachs and a weak set of United States housing numbers.

The NZ dollar was at 0.5678 euro at 5pm from 0.5722 euro at 8am and 0.5755 at 5pm yesterday.

The NZ dollar fell to 62.72 yen at 5pm from 63.70 at the same time yesterday, while the trade weighted index fell to 68.37 from 69.20.

- NZPA