NZ dollar rises on growing inflation talks

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The New Zealand dollar rose today after the Reserve Bank's survey of expectations showed firms are predicting inflationary pressures.

New Zealand Currency

New Zealand currency

Source: 1 NEWS

The kiwi gained to US73.31c as at 5pm in Wellington from 72.77c as at 8am and 72.62c late yesterday.

The RBNZ's March quarter survey showed firms lifted their two-year inflation expectations to 2.11 per cent from 2.02 per cent in the prior period, while one-year inflation expectations remained steady at 1.86 per cent.

The central bank has signalled it will keep the official cash rate at a record low 1.75 per cent until the latter half of next year at the earliest but does keep a close eye on the expectations as they have an impact on wage and pricing setting behaviour.

"The dollar got quite a bounce from the inflation expectations," Westpac head of NZ strategy Imre Speizer said.

It is a "bit of a puzzle" as to why the two-year inflation expectations lifted while the one-year outlook was steady, but Mr Speizer said firms may be factoring in new government initiatives and a revised policy targets agreement.

Investors are now waiting for US inflation data for January.

Headline consumer price inflation is forecast to slow to an annual 1.9 per cent and core inflation to 1.7 per cent.

If inflation is higher the greenback should get a solid lift as it will solidify expectations the Federal Reserve will be lifting rates in March.

The kiwi gained to A92.93c from 92.29c Tuesday and increased to 52.66 British pence from 52.46 British pence.

It traded at 59.16 euro cents from 59.06c, and rose to 4.6425 yuan from 4.5810 yuan but fell to 78.34 yen from 78.82 yen as Japan's currency gained traction against the greenback.

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