The New Zealand dollar rose against the U.S. dollar on Oct. 19 before an inflation report that will inform the Reserve Bank of New Zealand’s (RBNZ) next interest rate decision.
FXStreet reported the NZD/USD pair near 0.5663, up 0.20%, in an Oct. 19 market snapshot. Separately, the RBNZ published a higher reference rate of $0.56565 per New Zealand dollar for Oct. 19, compared with $0.56255 on Oct. 16. The reference rate is a reading at a set time, rather than a daily closing price.
Stats NZ has scheduled its September-quarter consumer price index release for Oct. 22. Annual inflation reached 4.1% in the June quarter, up from 3.1% in the March quarter and above the RBNZ’s 1% to 3% target range. The central bank projected a 3.9% annual rate for the September quarter in its September policy statement.
The RBNZ attributed much of the June inflation increase to higher fuel prices linked to the Middle East conflict. It estimated that the direct effect of fuel prices added 0.9 percentage points to quarterly inflation. The bank has also said higher fuel costs leave households with less to spend on other goods and services.
The RBNZ raised its Official Cash Rate by 25 basis points to 2.75% on Sept. 2. The central bank has said future rate decisions will depend on its assessment of inflation risks.
Brown Brothers Harriman forecast September-quarter prices would rise 0.8% from the preceding quarter and 3.8% from a year earlier. In an Oct. 18 analysis, the firm said swap pricing implied an 80% probability of another 25-basis-point rate increase on Oct. 28. Those figures are the firm’s forecast and market-pricing estimate, not official inflation data or a central bank commitment.
Brown Brothers Harriman also argued that inflation above target supported the case for further rate increases and could lend support to the New Zealand dollar. Stats NZ’s inflation report is due Oct. 22, followed by the RBNZ’s rate decision on Oct. 28.
