Kiwi drops as markets weigh up OCR path after CPI data

The New Zealand dollar traded weaker against the greenback on Friday after markets had a chance to digest the latest inflation figures, which showed little sign of domestic price pressures. The CPI was up 0.3% in the September quarter, coming in slightly higher than the 0.2% rise forecast by markets, which kept the annual change in inflation steady at 0.4%.

The NZD/USD pair was trading 0.29% lower at $0.6830 on Friday afternoon in Wellington, off Thursday's close in New York of $0.6850, and down further from a morning high of $0.6888 immediately after the CPI figures were released.

On Wednesday RBNZ Governor Graeme Wheeler signaled the bank's reluctance to drop the OCR below 2.5% by highlighting the risk associated with low interest rates, making particular note of the housing market after data earlier in the week showed house prices rising more than 25% year-on-year in Auckland last month.

Economists agree that the data, on balance, will see the Reserve Bank of New Zealand (RBNZ) hold off on cutting interest rates again until December, but beyond December there is greater uncertainty.