NZ dollar falls as benign inflation data adds to downward pressure on kiwi

The New Zealand dollar fell after figures showed inflation in the third quarter was slower than the Reserve Bank had forecast, giving it less reason to resume raising interest rates after pausing its tightening cycle in July.

The kiwi fell to 79.52 US cents as at 5 pm in Wellington, down from 79.09 cents immediately before the inflation data was released and down from 79.76 cents late yesterday. The trade-weighted index fell to 76.47 from 77.42 yesterday.

Government figures showed the consumer price index rose 0.3 percent in the third quarter, unchanged from three months earlier, for an annual pace of 1 percent, the bottom end of the central bank’s target range. The bank and economists had been expecting an annual rate of 1.3 percent. The kiwi has tumbled more than 9 percent in the past three months as concerns about faltering global growth weighed on so-called commodity currencies and the greenback strengthened.

“Because inflation has slowed down quite a lot there’s no real need to rush in hiking again after the RBNZ was pretty aggressive earlier in the year,” said Stan Shamu, market strategist at IG Markets. “Global macro issues have been weighing on many of the commodity currencies and a strong US dollar has been aided by expectations hiking will happen (in the US) by mid next year.”

In a speech to the BIS Conference on Cross-border Financial Linkages in Wellington today, Reserve Bank governor Graeme Wheeler said the introduction of limits on low-equity home loans last year had taken heat out of the housing market and allowed him to delay raising interest rates further.

The New Zealand dollar fell to 89.65 Australian cents from 90.69 cents yesterday, and declined to 62.13 euro cents from 62.66 cents. It traded at 84.27 yen from 85.26 yen and fell to 48.91 British pence from 49.45 British pence yesterday.

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