NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street

The New Zealand dollar rose back above 85 US cents before figures that are expected to show a pick-up in quarterly inflation and after gains on Wall Street and a modest increase in dairy prices to a new record.

The kiwi gained to 84.92 US cents, and earlier reached 85.06 cents, from 84.79 cents at 5pm in Wellington yesterday. The trade-weighted index fell to 77.92 from 78.05.

The Standard & Poor’s 500 Index climbed 1.4 percent as earnings from companies including Coca-Cola and Johnson & Johnson beat estimates and after US data reinforced perceptions that the Federal Reserve won’t end its quantitative easing any time soon, including the consumer price index unexpectedly slipping 0.2 percent in March

Prices of dairy products edged up to a new record at the latest GlobalDairyTrade auction though the rate of gain slowed amid signs the drought is breaking. Inflation was probably 0.4 percent in the first quarter, keeping the annual pace at 0.9 percent, according to a Reuters survey.

“The yearly inflation number is still toward the bottom of the Reserve Bank’s band,” said Tim Kelleher, head of institutional FX sales at ASB Institutional. “The risk is for a slightly higher number.” Interest rate markets are mulling the increased prospects of interest rate hikes by the Reserve Bank since the drought has broken, he said.

The Reserve Bank tries to keep inflation within a 1 percent to 3 percent target band and aims for the middle of the range.

The kiwi fell to 64.46 euro cents from 64.85 cents and was little changed at 81.73 Australian cents. It fell to 55.24 British pence from 55.52 pence and rose to 82.82 yen from 82.74 yen.