NZ dollar may fall on lukewarm retail data, rising unemployment in Australia

Thursday 12th November 2009

The New Zealand dollar may fall today if third-quarter retail sales are little changed as predicted and Australian data shows unemployment rose in the so-called “lucky country” last month.

Consumer confidence took a knock across the Tasman with the Westpac Melbourne Institute survey recording its first fall since May, stoking concerns about the strength of Australia’s economy, which avoided falling into recession earlier this year. The unemployment rate probably edged up to 5.8% in October, according to a Reuters survey. New Zealand’s consumers probably kept a tighter rein on their spending in the three months through September, with economists forecast no growth in sales in the period.

“If retail sales come in weaker than expected, the kiwi should come off after it struggled to push above 74.25 U.S. cents last night,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia. “The kiwi should be driven by the data today, given the reasonably quiet night offshore” due to the Veteran’s Day holiday in the U.S., he said.

The New Zealand dollar fell to 73.91 U.S. cents from 74.23 cents yesterday and declined to 65.87 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.96. It decreased to 66.39 yen from 66.68 yen yesterday and slipped to 79.52 Australian cents from 79.63 cents. It was little changed at 49.38 euro cents from 49.36 cents yesterday and advanced to 44.66 pence from 44.28 pence.

Kelleher said the currency may trade between 73.75 U.S. cents and 74.25 cents today, and is out of the downward trend of the past few weeks. The New Zealand currency “found support at 70.70 U.S. cents and until that breaks, you’re not going to see wholesale selling offshore,” he said.

Markets were volatile during the London session yesterday with widespread selling of the U.S. dollar, which hit a 15-month low, on the back of mixed Chinese data. China’s industrial production and retail sales beat expectations, but exports and imports declined more than expected.

The greenback rallied amid gains on Wall Street, after U.S. Treasury Secretary Timothy Geithner said “a strong dollar” was important for the health of the world’s largest economy.

The People’s Bank of China moved away from saying it will keep the renminbi “basically stable and at a reasonable and balanced level,” and said it expects future reforms in the Chinese exchange rate mechanism will take into account international capital flows and movements in major currencies, according to its quarterly monetary report.

The kiwi dollar fell to 5.05 Chinese yuan today from 5.07 yuan yesterday.

Businesswire.co.nz

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