Kiwi declines on slower inflation outlook

The New Zealand dollar fell in European trade against its US counterpart, after a hiatus from losses in recent days away from five-week lows, after data showed lower inflation forecasts for the next two years. 

Such forecasts raised more doubts about the pace of interest rate hikes by the Reserve Bank of New Zealand next week. 

The kiwi fell 0.4% against US dollar to 0.6329, with a session-high at 0.6366. 

The Kiwi rose 0.8% yesterday, the second profit in three days as the greenback dropped, with the New Zealand dollar climbing off five-week lows at 0.6270. 

Inflation Outlook

Recent official data showed the outlook for two-year inflation down 32 points to 3.30% from 3.62%. 

Such an expected decline would reduce pressure on the RBNZ and in turn hurt the Kiwi's standing. 

New Zealand Rates

Such outlook reduced chances of a 0.5% rate hike by the Reserve Bank of New Zealand next week. 

Forecasts for 2023

ASB, one of New Zealand's largest banks, expects kiwi to rise during the first half of the year before turning to losses in the second half. 

The analysts expect a real possibility of short-term gains for the local currency amid global momentum in favor of kiwi. 

As risk appetite improves and the Chinese economy reopens and global growth outlook rebounds, the New Zealand dollar will continuing receiving support. 

The kiwi is also expected to gain momentum against yen, considered a safe haven, and maintain its strength against euro and the British pound, before giving up some ground in the long term.