Reuters New Zealand
NZ dollar firm despite inflation data, debt mixed
Tuesday July 15, 06:05 PM
WELLINGTON, July 15 (Reuters) - The New Zealand dollar NZD= skirted a two-week high on Tuesday as lofty inflation data gave no new steer on the timing of interest rate cuts, leaving investors more concerned about U.S. financial sector woes.
The kiwi see-sawed briefly after the data showed consumer prices surging on the back of higher food and fuel costs, but settled with a firm tone just above its local opening.
"The kiwi shrugged off the inflation data, it's really a U.S. dollar weakness story with broad based weakness ahead of Bernanke's testimony before Congress," said RBC senior currency strategist Sue Trinh.
In late trade the kiwi was at $0.7655/59 compared with $0.7608/18 in local trade on Monday. The currency swung between $0.7623 and $0.7670 after the inflation numbers.
The kiwi was generally lower against other major currencies, touching a near seven-year low against the Aussie dollar NZDAUD=R.
New Zealand's consumer price index rose 1.6 percent in the second quarter, the biggest in 18 years, against a Reuters poll forecast of a 1.4 percent rise. Annual inflation was at a two year-high of 4 percent. See [nWEL240389]
However, non-tradeables inflation, a barometer of domestically generated price pressure, rose 0.9 percent on the previous quarter, suggesting a slowing economy may be starting to have an impact.
Whether the Reserve Bank of NZ would feel confident enough to start cutting rates at next week's review remained a line call.
"The tick down in annual non-tradeables inflation on its own leans towards a July cut. But the outlook for the third quarter leans back towards a September cut," said Westpac senior economist Doug Steel.
The market sees a 50:50 chance of a rate cut by the RBNZ this month, although most analysts surveyed by Reuters expect the move will come in September.
Another factor supporting the kiwi was the U.S. currency's decline towards record lows against the euro as traders worried about the financial system despite official measures to help out troubled mortgage lenders Fannie Mae FNM.N and Freddie Mac FRE.N.
Traders are waiting for Federal Reserve Chairman Ben Bernanke's appearance before the Senate Banking Committee later in the day to see his assessment of the impact of new events on policy.
New Zealand short-term debt closed softer, with the September bank bill contract yield NBBU8 a couple of basis points higher at 8.22 percent. However, the benchmark 10-year bond NZ10YT=RR gained in price, pushing yields down five basis points to 6.03 percent.
The New Zealand Debt Management Office held its second unannounced bond tender in a week with an offer of NZ$50 million each of April 2013 NZG0413=RNZL and December 2017 bonds NZG1217=RNZL.
The offer was 1.3 times covered, but as in last week's tender it accepted less than offered in the shorter-dated paper and compensated by accepting more in the longer-dated maturity. Tender results [nWLF000963]. A regular tender is scheduled for Thursday. (Reporting by Gyles Beckford)
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