The New Zealand dollar rose ahead of inflation data today which is expected to show rising consumer prices and may make it harder for the Reserve Bank to talk up rate cuts. 

The kiwi increased to 65.47 US cents as at 8am in Wellington from 65.01 cents yesterday. The trade-weighted index advanced to 71.49 from 71.12. 

New Zealand’s consumers price index probably rose at an annual pace of 1.7 percent in the September quarter, more than the RBNZ’s forecast for 1.4 percent. Governor Adrian Orr has left open the door for the official cash rate to go down in order to stimulate growth and will need to look through rising oil prices, a weaker currency and the introduction of regional petrol taxes to retain that bias.

Bank of New Zealand senior markets strategist Jason Wong said recent market volatility has also seen traders pare back their short positions in the kiwi, where they sell the currency on the expectation it can be bought back at a cheaper price. 

“We see this as a smart move ahead of today’s Q3 CPI report, where we see upside risk relative to the consensus estimate of 0.7 percent quarter-on-quarter and the RBNZ’s (out-of-date) 0.4 percent estimate,” he said in a note. “More importantly, core inflation could well tick higher, providing some food for thought to the RBNZ as it begins to prepare its next set of forecasts for the November MPS.”

The New Zealand dollar increased to 49.77 British pence from 49.60 pence yesterday after European Council president Donald Tusk said a Brexit deal appeared unlikely and that the regional bloc needs to prepare for that scenario. The local currency rose to 56.52 euro cents from 56.29 cents yesterday. 

The kiwi advanced to 91.71 Australian cents from 91.49 cents yesterday. Minutes to this month’s Reserve Bank of Australia policy review are scheduled to be released today. 

The New Zealand dollar rose to 4.5260 Chinese yuan from 4.4961 yuan yesterday ahead of Chinese inflation data. The kiwi increased to 73.24 yen form 72.85 yen yesterday. 

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