NZ dollar gains after Australian inflation faster than expected

The New Zealand dollar rose after Australian inflation was a little higher than expected in the third quarter, supporting demand for the Australian dollar and dragging the kiwi with it.

The kiwi rose to 79.76 US cents at 5pm in Wellington from 79.55 cents at 8am, though little changed from 79.85 cents yesterday. The local currency gained to 90.71 Australian cents from 90.57 cents yesterday.

Australian inflation rose 0.5 percent in the three months ended Sept. 30, according to the Bureau of Statistics, just ahead of expectations for a 0.4 percent quarterly pace. This month the Reserve Bank of Australia kept the key rate at 2.5 percent, and governor Glenn Stevens said inflation would likely stay within the central bank’s target band, with tepid wage growth constraining any price increases.

“We had Australian inflation numbers today which, on balance, were slightly higher than expected,” said Michael Johnston, senior trader at HiFX in Auckland. “The Aussie got pushed up, helping drag the kiwi along for the ride.”

New Zealand inflation figures tomorrow are expected to show local consumer prices rose 0.5 percent in the third quarter, below the Reserve Bank’s expectations, and may cement the view that further interest rates hikes will be pushed out.

Traders will also be watching US inflation data in Northern Hemisphere trading for another gauge on the strength of the US economy. Upbeat data in the world’s biggest economy has underpinned the view that the Federal Reserve will start lifting interest rates from its near-zero policy.

The local currency rose to 85.28 yen at 5pm in Wellington from 85.09 yen yesterday, and advanced to 62.68 euro cents from 62.33 cents. It edged up to 49.45 British pence from 49.37 pence yesterday. The trade-weighted index increased to 77.42 from 77.26.

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