NZ dollar gains as US inflation data stokes reflation talk, prospect of rate hikes

The kiwi declined to 71.77 US cents as at 8am in Wellington from 72 cents late yesterday.

The New Zealand dollar rose after stronger-than-expected US inflation figures stoked talk of global 'reflation' which will hasten central bank moves to tighten monetary policy.

The kiwi advanced to 72.08 US cents as at 8am in Wellington from 71.73 cents late yesterday. The trade-weighted index rose to 78.49 from 78.11.

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The US consumers price index rose 2.5 per cent in the 12 months through January, the biggest year-on-year gain since March 2012, and faster than economists were expecting. Other figures showed retail sales rose 0.4 per cent last month, four times faster than expected. US stocks rose and bond yields gained after the data.

"Ultimately the pressure for higher rates is expected to remain in the face of the global reflation trade and signs that the NZ economy is going down a similar path," said Jason Wong, currency strategist at Bank of New Zealand, in a note. "The global reflation trade continued on the release of strong US CPI and retail sales data."

Traders will be watching for the ANZ consumer confidence report for February, a speech by Finance Minister Steven Joyce and the Crown accounts for the six months ended Dec. 31 today.

The kiwi rose to 57.88 British pence from 57.52 pence and gained to 68.07 euro cents from 67.74 cents. It rose to 93.60 Australian cents from 93.42 cents and gained to 82.33 yen from 81.96 yen. The kiwi rose to 4.9494 yuan from 4.9233 yuan.