NZ dollar advances on weaker US data, buoyant Australian retail sales

Tuesday 5th November 2013

The New Zealand dollar advanced on the coattails of weaker US data and buoyant Australian economic figures.

The kiwi gained to 82.80 US cents at 8am in Wellington from 82.51 cents at the 5pm market close yesterday. The trade-weighted index rose to 76.92 from 76.80 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, declined after a gauge of US business spending plans dropped more than estimated in September, fuelling expectations the Federal Reserve will keep its monetary stimulus into next year. The kiwi was also buoyed along by a rise in the Australian dollar, which was the best performing currency overnight after better-than-expected retail sales data yesterday.

"The slight strength that we are seeing in the kiwi is twofold, a little bit on the coattails of the Aussie dollar after better-than-expected retail sales yesterday and because data out of the US was slightly less than expected, adding some US dollar weakness overnight and that is why we are a fraction higher here," said Stuart Ive, senior client advisor, foreign exchange and derivatives at OM Financial. "We will continue to see this little bit of strength creeping in."

In the US overnight, data showed new orders of non-military capital goods excluding aircraft fell 1.3 percent in September, below the government estimated for a 1.1 percent drop.

Separately, Federal Reserve governor Jerome Powell said the central bank will probably push on with highly accommodative policy for some time, with the date unclear for any tapering in US$85 billion in monthly bond purchases, Bloomberg reported.

Meanwhile, in Australia yesterday, a report showed retail sales grew 0.8 percent in September, the fastest pace in seven months and ahead of the 0.4 percent expected by economists in a Bloomberg survey. That has added to speculation that the Reserve Bank of Australian won't cut the benchmark interest rate below the current 2.5 percent.

The Australian central bank is scheduled to release its latest interest rate decision at 4:30pm New Zealand time today.

Markets in Australia and New Zealand may be quieter day as traders eye the Melbourne Cup horse race, Imre Speizer, markets strategist at Westpac Banking Corp. in Auckland, said in a note.

The New Zealand dollar was little changed at 87.12 Australian cents from 87.05 cents yesterday, at 51.87 British pence from 51.81 pence and at 61.28 euro cents from 61.21 cents. The kiwi advanced to 81.68 yen from 81.48 yen.

Traders today will also be eyeing a Chinese HSBC services manufacturing index for October for an indication on how Asia's largest economy is tracking. The report is scheduled for release at 2:45pm New Zealand time.

BusinessDesk.co.nz

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