NZ dollar gains ahead of US retail sales, local inflation

Monday 15th July 2013

The New Zealand dollar gained as investors keep an eye on US retail figures in the Northern Hemisphere session and local inflation data tomorrow.

The kiwi traded increased to 78.14 US cents at 5pm in Wellington from 77.80 cents at 8am and 77.76 cents on Friday in New York. The trade-weighted index rose to 74.26 from 74.04 last week.

US consumer spending probably rose 0.8 percent in June, according to a Bloomberg survey of economists, which would make it the fastest monthly gain since February. US data has been increasingly important for traders as they weigh up whether the Federal Reserve will start unwinding its money printing programme this year. Fed chair Ben Bernanke will give more guidance in a speech later in the week.

"US retail sales tonight are the big number - that's it, that'll shake the cage," said Alex Hill, head of dealing at HiFX in Auckland. "Our bias for the kiwi is generally lower."

A BusinessDesk survey of 10 traders and strategists predicts the local currency will trade between 76 US cents and 79.50 cents this week. Four expect the New Zealand dollar to remain unchanged, five predict a decline while one expects a gain.

Figures tomorrow are expected to show New Zealand consumer prices rose at an annual pace of 0.8 percent in the second quarter, according to a Reuters survey, meaning the Reserve Bank has plenty of scope to keep interest rates on hold.

Hill said the inflation data will have the biggest bearing on the trans-Tasman cross-rate, where the Reserve Bank of Australia may cut rates, and the local central bank has a bias towards higher rates.

The kiwi fell to 85.74 Australian cents from 85.90 cents last week after Chinese figures showed the world's second biggest economy grew at an annual pace of 7.5 percent, in line with expectations. China is the biggest trading partner of the South Pacific nations, though Australia has more exposure through its exports of resources.

The local currency gained to 77.57 yen at 5pm in Wellington from 77.13 yen on Friday in New York, and advanced to 59.77 euro cents from 59.50 cents. It rose to 51.67 British pence from 51.46 pence last week.

BusinessDesk.co.nz

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