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NZ dollar falls ahead of inflation data

The New Zealand dollar was weaker as the market positioned itself for Wednesday's release of the September quarter inflation figures.

The kiwi was trading at 63.12 US cents at 5pm in Wellington from 63.30 at 8am. The trade-weighted index was at 70.03 points from 70.34.

"I think the market's positioning itself for Wednesday. The CPI is likely to be on the weak side," says Martin Rudings, a dealer at OMF.

The Reserve Bank of Australia will release the minutes of its last meeting tomorrow at 1.30pm local time. "The market's expecting the RBA to pull away from cutting rates," Rudings says.

Economists expect the consumers price index rose 0.6 percent in the latest quarter, taking the annual rate to 1.4 percent, down from 1.7 percent in the June quarter.

The Reserve Bank of New Zealand targets 2 percent annual inflation and, unlike the RBA, is expected to cut its official cash rate again in November.

Data from China – New Zealand's biggest trading partner – brought gloomy news with its September exports falling 3.2 percent from a year ago, while imports dropped 8.5 percent. Economists had expected exports to fall by 3 percent and imports to decline by 5.2 percent.

Although the RBA's cash rate is at 0.75 percent and the RBNZ's OCR is at 1 percent, the fact that Australia is viewed as having cut rates, at least for now, is making the Australian dollar appear more attractive than the kiwi.

The currency was trading at 92.92 Australian cents from 93.21 this morning.

China is both Australia and New Zealand's largest trading partner and Australia is New Zealand's second-largest trading partner. Rudings says the trade data has little to do with today's currency trading activity.

"Normally, that would push the Aussie dollar down and the kiwi / Aussie cross would go up, but we didn't have any of that."

The New Zealand dollar was trading at 50.07 British pence from 50.17, at 57.21 euro cents from 57.34, at 68.35 yen from 68.58, and at 4.4481 Chinese yuan from 4.4852.

The two-year swap rate edged down to a bid price of 0.8843 percent from 0.8872 on Friday while the 10-year swaps rose to 1.2800 percent from 1.2425.

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