NZ dollar outperforms aussie

File photo / NZH

The New Zealand dollar outperformed the Australian dollar, which came under pressure when lower than expected inflation data reduced the chances of a rate rise next week.

While the focus in this market is turning to the Reserve Bank of New Zealand's (RBNZ) official cash rate decision tomorrow. The central bank is expected to keep the rate unchanged at 3 per cent.

The NZ dollar was at US74.70c at 5pm, little changed from US74.88c at 8am and down from US75.27c at 5pm yesterday. It rose against the Australian dollar to A76.78c at 5pm from A75.98c at the same time yesterday.

The Australian dollar fell more than one US cent to be US97.23c at 5pm from US98.36c at 8am after the Australian Bureau of Statistics said the consumer price index (CPI) rose a less than expected 0.7 per cent in the September quarter, for an annual rate of 2.8 per cent.

The figure implied it was less likely the Reserve Bank of Australia (RBA) would raise rates next Tuesday.

"Aussie was under pressure from the CPI, which dominated," said Imre Speizer, strategist at Westpac.

A National Bank Business Outlook survey today showing a recovery in confidence, particularly in Canterbury in October, was also a factor in NZ dollar strength.

Mr Speizer said the RBNZ was likely to hold interest rates and there was a good chance of a more dovish statement than previously.

"Either it will be more dovish or neutral," he said.

Overall, uncertainty about the extent of quantitative easing measures the US Federal Reserve have made markets unpredictable and have generally supported the US dollar.

News that the British economy grew 0.8 per cent in the third quarter, twice as much as economists had forecast, supported the view that any easing of policy by the Fed may not be as big as anticipated. The NZ dollar was down to 47.20p at 5pm from 47.86p at the same time yesterday.

BNZ markets strategist Mike Jones said the NZ dollar spent most of yesterday and overnight drifting lower, with sharp losses against the British currency providing some headwinds.

Mr Jones said the rise in British GDP put a stop to persistent rumours additional quantitative easing was needed in Britain.

- NZPA