Kiwi touches 3-week high as US inflation meets estimates

(BusinessDesk) - The New Zealand dollar rose to a three-week high after US inflation printed in line with expectations and US President Donald Trump dumped his Secretary of State Rex Tillerson.

The kiwi traded at 73.22 US cents as at 8am in Wellington, and reached as high as 73.54 cents overnight, from 73.12 cents late yesterday. The trade-weighted index was little changed at 74.99 from 74.92 yesterday.

US core CPI rose 0.2 percent in February, matching economist forecasts, while the year-on-year rate of 1.8 percent was also in line with expectations. The data prompted speculation that the Federal Reserve will raise interest rates three times this year, starting as soon as next week, while stronger inflation would have suggested a more aggressive cycle of tightening. Meanwhile, Trump fired Tillerson and named CIA chief Mike Pompeo as his replacement. The US dollar index fell to its lowest level this week.

"The US CPI data passed by with few fireworks overnight, coming in on expectations," said Philip Borkin, senior macro strategist at ANZ Bank New Zealand, in a note. "The numbers don't really alter the picture for the Fed, which looks set to continue to remove stimulus in a gradual fashion."

Borkin said news of Tillerson's replacement "appeared to cause a few market jitters overnight, as some are worried that Pompeo could be firmer on current geopolitical issues (North Korea and Iran) and also be less of a handbrake on the protectionist rhetoric coming out of the White House."

Today in New Zealand traders will be focusing on balance of payments data for the fourth quarter, expected to show the current account deficit remained at 2.6 percent of gross domestic product. GDP data is due out tomorrow, with growth of 0.8 percent forecast by economists.

Also out today are Real Estate Institute figures for February.

The kiwi rose to 78.07 yen from 77.91 yen yesterday and gained to 93.22 Australian cents from 92.85 cents. It fell to 59.08 euro cents from 59.30 cents and dropped to 52.42 British pence from 52.60 pence. The kiwi traded at 4.6260 yuan from 4.6244 yuan.