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NZ dollar under pressure ahead of housing data despite upbeat global outlook

Friday 16th April 2010

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The New Zealand dollar has been strained since Wednesday’s weak consumer spending data and today’s housing data isn’t expected to give the currency a reprieve, with March’s sales expected to be flat.

The Real Estate Institute of New Zealand’s March data on home sales and prices out today will likely show the market remained subdued with mortgage approvals low and investors wary of potential changes to the way investment properties are taxed.  

Wednesday’s surprisingly weak retail numbers kept the gloss off the kiwi, despite upbeat global support for higher-yielding, or riskier, assets.

Stocks on Wall Street continued to climb amid optimistic earnings forecasts, while China again exceeded expectations as data showed its economy grew an annual 11.9% in the first three months this year.  

“Retail sales were far weaker than anyone expected, so the housing data would need to be shockingly weak” to drag the currency lower, said Khoon Goh, senior markets economist at ANZ New Zealand.

“The kiwi will probably start to test the 71 US cents level – it tried to do it a couple of times yesterday and failed so that’s going to be the key downside.”  

The kiwi slipped to 71.13 US cents from 71.18 cents yesterday, and dropped to 65.68 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.87.

It declined to 66.18 yen from 66.31 yen yesterday, and fell to 76.15 Australian cents from 76.44 cents.

It decreased to 52.37 euro cents from 52.60 cents yesterday, and was down to 45.89 pence from 46.21 pence.  

Goh said the currency may trade between 71 US cents and 71.50 cents today as it stays on the back-foot amid the downbeat assessment of New Zealnad’s consumer spending.  

He expects more volatility in the cross-rates against the euro and the pound as news about Greece’s fiscal woes flares up intermittently, while the uncertainty over England’s elections keeps investors wary about the British currency.  

Bank of New Zealand strategist Mike Jones said the strong Chinese economic data “added fuel to the fire for those calling for a revaluation in the Chinese yuan to slow Chinese growth and rebalance world trade”.  The BNZ’s economists expect the yuan’s peg to the US dollar to be relaxed sooner rather than later.

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