NZ dollar shrugs off weak retail sales data, awaits offshore events

Monday 26th November 2018

The New Zealand dollar is slightly higher as investors await offshore events, including a raft of US data, minutes from the US Federal Reserve and a highly anticipated meeting between US President Donald Trump and his Chinese counterpart Xi Jinping.

The kiwi traded at 67.84 US cents at 5pm from 67.73 US cents at 8am in Wellington and 67.79 cents on Friday in New York. The trade-weighted index was at 74.10, unchanged from late Friday in Wellington.

The kiwi initially fell about 30 points against the greenback when Statistics New Zealand data showed that retail sales were flat on a seasonally adjusted basis in the three months ended Sept. 30. Economists had expected a 1 percent increase in the volume of trade.

Mike Shirley, senior dealer, FX & Interest Rate Sales at KiwiBank, said the data drove the sell-off but it was a "knee-jerk reaction."

"Then the dust settles and everyone assesses the data and it retraces back up."

Over the week he expects the kiwi will be driven by offshore events.

"There is an enormous amount of offshore data this week and very little on the domestic front so once again the New Zealand dollar is going to be a bit of a sail-less dinghy bouncing around on a sea of volatility."

He pointed to US consumer confidence data, the personal consumption expenditure indicator - considered the US Federal Reserve's preferred measure of inflation - and minutes from the Fed's latest monetary policy meeting.

Shirley said there is a growing belief the Fed may not hike as aggressively in 2019 as previously expected and the minutes will be closely scrutinised to see if they start hinting in that direction. That will weigh on the greenback and boost the kiwi.

Also, "we are steaming headfirst toward the G20 on the weekend," where markets are hoping for some sort of progress in the US-China trade skirmish.

The kiwi traded at 52.94 British pence from 52.74 pence last week and was at 59.82 euro cents from 59.74 cents.

The local currency traded at 76.80 yen from 76.53 yen last week and was at 93.66 Australian cents, unchanged from late Friday in Wellington. It traded at 4.7119 Chinese yuan from 4.7078 yuan last week.

New Zealand's two-year swap rate fell 1 basis point to 2.11 percent; the 10-year swaps were down 3 basis points at 2.94 percent.

(BusinessDesk)

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