NZ rises, Aussie near 2-wk lows
SYDNEY/WELLINGTON: The New Zealand dollar climbed on Thursday after first-quarter inflation accelerated to a surprisingly brisk 2.2 percent, the fastest in five years, leading investors to slightly narrow the odds on a future rate hike.
The New Zealand dollar was up 0.5 percent to $0.7036, not far from a one-month peak of $0.7053 touched on Wednesday.
The annual pace of inflation moved back above the middle of the Reserve Bank of New Zealand’s (RBNZ) 1 to 3 percent target band for the first time since 2011.
The lift was largely due to temporary gains from higher oil and food prices and a tax hike on alcohol and tobacco. But the core reading was still low, making a rate hike unlikely for now.
The RBNZ slashed rates over the past year to a record low 1.75 percent and signalled in its February policy statement that it would keep rates at that level for two years or more to boost inflation and offset global uncertainty. “We don’t see the Bank shifting to a hawkish stance until inflation expectations shift materially higher,” said Annette Beacher, chief macro strategist, FX and rates.
“The Bank’s near-term CPI profile will be lifted in the May Monetary Policy Statement, but is unlikely to change over the medium-term.”
Across the Tasman Sea, the Australian dollar treaded water near two-week lows. It was last at $0.7505, from a low of $0.7492 touched on Wednesday. Investors were anxious ahead of this weekend’s first round of presidential voting in France.
Millions of French voters remain undecided, making this the least predictable vote in France in decades and raising fears of a potential surprise result that could spread turmoil in markets.—Reuters
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