NZ Dollar Strengthens As Higher Inflation Raises Rate Hike Chance

The New Zealand dollar firmed against other major currencies in early Asian deals on Tuesday, as the nation’s inflation rate picked up in the fourth quarter, fueling speculation that the Reserve Bank of New Zealand would raise interest rates soon.

Consumer prices in New Zealand were up a seasonally adjusted 0.1 percent in the fourth quarter of 2013 compared to the previous three months, Statistics New Zealand said today.

That surpassed forecasts for a flat reading following the 0.9 percent jump in the third quarter.

Higher international air fares and rising housing and dairy prices were partly countered by lower vegetable prices and cheaper petrol in Q4, the statistics bureau said.

On a yearly basis, inflation climbed 1.6 percent – also topping expectations for an increase of 1.5 percent and up from 1.4 percent in the previous three months.

The data cemented hopes that the central bank may start raising rates by the middle of this year on the back of an improving economy.

The kiwi appreciated to 0.8341 against the greenback, its strongest since January 17. If the kiwi continues its bullish run, it may test resistance around the 0.845 zone.

The kiwi hit a 4-day high of 87.22 against the yen, reversing from yesterday’s lowest level of 85.54 in more than 2 weeks. On the upside, 88.00 is likely seen as the resistance for the kiwi.

The kiwi climbed to 1.6239 against the European currency for the first time since January 14. Further gains could lead the kiwi to find resistance around the 61.00 region.

The kiwi advanced to a 4-day high of 1.0570 against the aussie and further uptrend above the 1.054 mark could lead to highest level set in 2005. The next possible upside target for the kiwi is seen around the 1.04 area.

Looking ahead, German ZEW economic sentiment index for January is due in the European session.

Canada wholesale sales and manufacturing shipments for November are set for release in the New York session.

The material has been provided by InstaForex Company – www.instaforex.com

Read more here: NZ Dollar Strengthens As Higher Inflation Raises Rate Hike Chance