Markets in Range, Kiwi Lower after CPI

Focus was on commodity currencies during the Asian session today. Kiwi retreats from Friday's high after report showed that consumer prices in New Zealand rose less than expected in Q3. CPI moderated further from 2.0% yoy to 1.8% yoy, below expectation of rising to 2.1%, suggesting the RBNZ's four hikes since the start of the year are doing their job. The fall in CPI is attributed to one-off government changes to education and healthcare funding costs as well as the effect of drop in petrol prices in late 06. Inflation is expected to reaccelerate in Q4 and remains high in 08. RBNZ is still expected to be vigilant on inflation. Though, today's lower than expected CPI, coupled with Friday's lower than expected retail sales growth are giving time to the RBNZ to be on hold and wait-and-see. On the other hand, Aussie remains strong, partly supported by AUD/NZD flows and edges to new 23 year high of 0.9065.

Elsewhere, markets basically stay in tight range. BoJ Governor Fukui reiterated that Japan will likely achieve "long-lasting economic growth" even though there are still uncertainties in the global economy. Monetary policy will be implemented appropriately by closely examining economic and price data. ECB's Tricked reiterated that excess volatility in the currency markets hurts economic growth ahead of G7 meeting this weekend. The economic calendar for the rest of the day is light, with NY state manufacturing index featured. Treasury Paulson and Breanne are both scheduled to speak.