Soft inflation data takes kiwi's bounce

Surprisingly soft inflation data put a dampener on the New Zealand dollar which gained, then lost, half a US cent this morning as the likelihood of an interest rate rise in June receded.

The March quarter consumers price rise of 0.4 per cent was lower than expected, with the median forecast in a Reuters poll of economists a quarterly increase of 0.6 per cent. The latest increase, which followed a 0.2 per cent fall in the December quarter, kept the annual rate at 2 per cent.

Ahead of the data, the kiwi jumped from US70.95c to a session high of US71.45c, said Westpac senior market analyst Imre Speizer.

"People were expecting quite a bullish number."

The kiwi then settled back around US70.90c for most of the day, aside from a spike in the afternoon following a bullish outlook from the Reserve Bank of Australia suggesting more rate hikes ahead across the Tasman.

In contrast, the market is now pricing in about a 33 per cent chance of a Reserve Bank of New Zealand rate rise in June, having pared it right back after the CPI data, Mr Speizer said. The first hike was now likely in July.

By 5pm, the kiwi was at US71.00c, from US70.86c late yesterday afternoon, having dropped to its lowed point in more than a week of US70.50c overnight.

Against the aussie, the kiwi was at A76.46c from A77.04c at 5pm yesterday. The kiwi was a touch firmer at 0.5265 euro, and rose to 65.76 yen from yesterday's 65.21 yen, but eased to 46.32 pence from 46.40p.

The trade weighted index was unchanged at 65.75.

- NZPA