Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZ dollar dives on weak CPI data

NZ dollar dives on weak CPI data, cushioned by strong China data

By Jenny Ruth

April 17 (BusinessDesk) - The New Zealand dollar was sharply lower but off its lows as positive economic data from China and euphoria over the government’s decision to can a capital gains tax helped cushion the impact of a weaker than expected inflation print.

The kiwi was trading at 67.30 at 5pm in Wellington, off the day’s low at 66.95 and compared with 67.60 at 8am, while the trade-weighted index sank to 72.85 points from 73.21.

The Consumers Price Index for the March quarter came in at 0.1 percent, below market expectations of about 0.3 percent and the Reserve Bank’s 0.2 percent forecast. That took the annual inflation rate to 1.5 percent, below the central bank’s 2 percent target.

“The big news was the CPI miss,” says Mike Shirley, foreign exchange dealer at Kiwibank. “Just as the CGT announcement came out, we also had a raft of fairly positive Chinese releases.”

Prime Minister Jacinda Ardern said the public has spoken and she won't introduce a capital gains tax while she leads the Labour Party.

The data from China showed its economy grew at a 6.4 percent annual pace in the March quarter, above expectations for a 6.3 percent growth rate.

As well, industrial production in China jumped 8.5 percent in the month of May while retail sales grew by 8.4 percent, both of those measures also well above expectations.

Such strong figures suggest that stimulatory measures the Chinese government has implemented are beginning to take effect.

Shirley says a Reserve Bank measure of underlying inflation came in at 1.7 percent in the March quarter, unchanged from the December quarter, also tempering the impact of the weak CPI print.

“It’s not a significant driver, but it muddies the waters a bit and may explain why the kiwi is holding up above the 67.20 level,” he says.

Nevertheless, Kiwibank’s economists are now predicting the Reserve Bank will cut its official cash rate from its present record low at 1.75 percent to 1.5 percent in May.

Certainly, the wholesale interest rate market reaction suggests the market is veering back towards that expectation after seeming to shrug off the possibility of an OCR cut so soon, in recent days.

The New Zealand two-year swap rate fell to 1.6389 percent from 1.7061 yesterday, but remains above its record low at 1.5475 on March 28, the day after the Reserve Bank changed its stance from neutral to expecting the next move in the OCR would probably be down.

The 10-year swap rate sank to 2.2550 percent from 2.2950.

The New Zealand dollar was trading at 93.59 Australian cents versus 94.23, at 51.52 British pence from 51.80, at 59.53 euro cents from 59.88, at 75.36 Japanese yen from 75.69 and at 4.5121 Chinese yuan from 4.5348.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Robertson Speech: Budget Sees Wider Debt Target

"New Zealand is well positioned to face this instability and uncertainty, but we are not immune from its impacts. Growth rates are set to be lower than we have seen in recent years..." More>>


Commerce Commission: Spark Warned Of Broadband Price Rise

The warning follows an investigation into representations Spark made on its website and in emails in August and September 2018, notifying in-contract customers receiving its copper-based broadband service of its decision to increase the price by $5 a month. More>>

Law Commission: Resist Rushing To New “Deepfake” Law

Artificial intelligence techniques can create massive volumes of fake audio, images and video that is incredibly convincing and near-impossible to detect... While it is tempting to respond with new law, the study finds that the long list of current legislation covering the issues may be sufficient. More>>


'Contrary To US Interests': US Lockout Sees Android Ditch Huawei

Effective May 16, 2019, the Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) by adding Huawei Technologies Co., Ltd. (Huawei) to the Entity List. More>>