NZ dollar falls as electronic card spending misses expectations

Tuesday 11th July 2017

The New Zealand dollar fell after investors were disappointed by softer than expected retail spending on electronic cards in June, despite a boost from the British and Irish Lions' rugby tour.

The kiwi dropped to 72.33 US cents as at 5pm from 72.72 US cents as at 8am in Wellington and 72.76 cents late yesterday. The trade-weighted index fell to 77.79 from 78.21.

Government figures today showed retail spending on credit and debit cards was unchanged in seasonally adjusted terms from May when it fell 0.4 percent. Electronic card spending is second-tier data and doesn't typically move currency markets.

"Today the market paid a lot of attention to the data because it was a significant miss. The market was expecting a 0.8 percent bounce and we got 0 percent and so they sold the kiwi," said Westpac Banking Corp FX strategist Imre Speizer.

The anticipated boost from the rugby tour only boosted hospitality spending, while other categories were weaker than expected, said ASB Bank economist Nathan Penny. The Lions tour kicked off on June 3 and ended on July 8. In particular, lower fuel prices offset the gains. The Reserve Bank is keeping a close watch on consumer spending for any signs of inflationary pressures but "there is no smoking gun here," said Penny.

The kiwi fell to 95 Australian cents from 95.61 cents yesterday as the Australian dollar also gained after data that pointed to upbeat business conditions across the Tasman.

Looking ahead, Westpac's Speizer said investors will be waiting for testimony from Federal Reserve chair Janet Yellen, who is scheduled to give testimony to the US Congress on Wednesday in Washington and may reiterate that the US central bank sees economic conditions conducive to a third interest rate hike in 2017.

On Tuesday, San Francisco Federal Reserve Bank president John Williams told an audience in Sydney he still expected one more rise in interest rates from the Federal Reserve this year and for it to start unwinding its massive balance sheet in the next few months. Speizer said US inflation data will also be key for markets as well as Wednesday's Bank of Canada rate decision.

The kiwi dropped to 82.72 yen from 83.04 yen yesterday and fell to 4.9210 yuan from 4.9482 yuan. It was little changed at 56.16 pence from 56.43 pence and 63.51 euro cents from 63.81 euro cents.

New Zealand's two-year swap rate fell 2 basis point to 2.30 percent, and 10-year swaps fell 2 basis points to 3.40 percent.

(BusinessDesk)

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