Kiwi falls against Aussie dollar

The New Zealand dollar has fallen against its Australian counterpart after accelerating inflation reduced the chance the Reserve Bank of Australia will cut interest rates


THE kiwi fell to 93.81 Australian cents from 94.46 cents immediate before the inflation report and 94.40 cents on Tuesday.

It traded at 83.22 US cents at 5pm in Wellington from 83.09 cents at 8am and 83.21 cents on Tuesday.

Australian consumer prices rose at an annual pace of 2.7 per cent in the December quarter, ahead of market expectations of a 2.5 per cent rise.

The faster-than-expected pace of inflation saw the Australian dollar gain on the prospect the RBA won’t be able to cut rates again to revive a moribund economy.

“The CPI number capped the chance of a rate cut any time soon, and the kiwi/Aussie took a bit of a dip,” said Alex Hill, head of dealing at HiFX in Auckland.

The Australian inflation figures follow Tuesday’s New Zealand consumers price index which unexpectedly rose in the December quarter, fuelling expectations the Reserve Bank of New Zealand will hike rates as early as next week.

But Mr Hill is sceptical the RBNZ will lift rates as housing data is showing early signs the central bank’s restrictions on low equity home lending are starting to bite and while the local currency remains high.

The kiwi fell to 86.54 yen at 5pm in Wellington from 87.06 yen on Tuesday and to 61.31 euro cents from 61.42 cents.

The trade-weighted index fell to 78.86 from 79.09.