New Zealand Dollar Down Late on U.S.Strength, Local Rate Outlook

 
   By Lucy Craymer 
 

        WELLINGTON, New Zealand--The New Zealand dollar is trading lower due to broad strength in the U.S. dollar and growing expectations of benign inflation in New Zealand.
        "The sudden cooling of interest in the New Zealand dollar seems to have transcended any particular shift in the fundamental picture. Just last week, New Zealand dollar was unstoppable, gaining even in the face of a strong U.S. dollar upswing," said Bank of New Zealand currency strategist Raiko Shareef.
        The feverous eyeing of parity in New Zealand dollar-Australian dollar was a factor in keeping New Zealand dollar-U.S. dollar supported last week but as investors start to believe the economic fundamentals of the two countries don't warrant parity, this pair has dropped off, he said.
        Alex Hill, Head of Corporate Foreign Exchange at NZForex, said the New Zealand dollar was also being hit by expectations that New Zealand's central bank might not increase rates as quickly as some thought.
        "We are seeing predicted inflation in New Zealand go down, we are seeing even the banks in New Zealand adjust their mortgage rates down so you don't have to look very far to see the interest rate outlook is softening as well," said Mr. Hill.
        However, the New Zealand dollar jumped against the Australian dollar late this afternoon after the more hard commodity-sensitive dollar dropped sharply against the U.S. dollar as copper prices fell to their lowest level in more than five years, in line with plummeting crude oil prices.
        The red metal suffered as plunging crude oil prices have sparked fears of deflation in major economies, which are big consumers. At 0205 GMT, three-month London Metal Exchange copper price was down by around 5% to $5,475/ton, rebounding from a low of $5,353.25/ton earlier in the day.
        In Wellington trading Wednesday, the New Zealand dollar was at US$0.7708 versus US$0.7791 late Tuesday. The New Zealand dollar was at A$0.9523 compared with A$0.9514 late Tuesday.
        Write to Lucy Craymer at lucy.craymer@wsj.com, @lucy_craymer
        (END) Dow Jones Newswires

        January 13, 2015 23:49 ET (04:49 GMT)

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