The New Zealand dollar continues to trade above US$0.56

Daily Currency Update

The New Zealand dollar is slightly weaker this morning when valued against the US dollar. The New Zealand dollar has been one of the better performers (higher on most crosses), down to US$0.5660, not much lower than this time yesterday. New Zealand rates are struggling to keep pace with United States rates, so there’s no New Zealand support from that source, while risk appetite is weaker, helping to support the USD across the board. NZD/AUD continues to drift higher to AU$0.9040, higher New Zealand-Australian rates being a key driver of the gains seen over the past week.
On the local front yesterday, New Zealand’s central bank was vindicated for holding to its aggressive policy path after New Zealand inflation smashed forecasts and recast interest rate expectations across the Tasman. According to Statistics New Zealand, annual inflation grew at 7.2 per cent in the third quarter, just below a three-decade high, and beating consensus for growth of 6.6 per cent as the price of fresh produce surged. The result has prompted economists and financial markets to upgrade the New Zealand cash rate outlook. The Reserve Bank of New Zealand raised the New Zealand cash rate half a percentage point this month, declining to moderate the pace of interest rate increases as global growth fears and recession risks mounted. Its cash rate is 3.5 per cent. Kiwi Bank calls for an outsized 0.75 percentage points increase to the cash rate in November, from a previous forecast of a 0.5 percentage points lift.