NZ dollar advances after weak US retail sales weigh on interest rate outlook

Thursday 15th January 2015

The New Zealand dollar advanced after a weak US retail sales report for December increased speculation the Federal Reserve may delay its looming interest rate hike.

The kiwi rose to 77.20 US cents at 8am in Wellington, from 77.03 cents at 5pm yesterday. The trade weighted index was little changed at 78.64 from 78.63 yesterday.

US retail sales fell 0.9 percent in December and November's gain was revised lower to 0.4 percent. Copper prices slumped amid concerns about the prospects for the world economy as the World Bank cut its forecast for global growth, warning that the world economy remained overly reliant on the “single engine” of the US recovery. The kiwi touched a low of 76.88 US cents yesterday evening but rebounded to touch a high of 77.78 cents early this morning following the US data.

"The New Zealand dollar reluctantly followed the Australian dollar lower as the Australian dollar was driven lower by copper falls," ANZ Bank New Zealand chief economist Cameron Bagrie and senior FX strategist Sam Tuck said in a note. "Overnight saw stabilisation but an attempt to strengthen after weak US retail sales was rebuffed."

The kiwi will probably trade between 76.80 US cents and 77.90 cents today and may weaken as the New York Empire State Manufacturing Index for December and the Philadelphia Fed factory survey for January, scheduled for release tonight, should renew US optimism, according to ANZ.

In New Zealand today, data is due out on food prices for December, and the Real Estate Institute may publish its latest report on house prices.

The New Zealand dollar slipped to 94.77 Australian cents from 95.19 cents yesterday ahead of Australia's employment data for December.

The local currency advanced to 65.50 euro cents from 65.41 cents yesterday as the European common currency weakened following the European Court of Justice’s ruling that the European Central Bank's stimulus programme came within the ambit of monetary policy. The decision increased speculation the ECB may launch a quantitative easing programme at its meeting next week.

The kiwi fell to 50.71 British pence from 50.83 pence yesterday and dropped to 90.27 yen from 90.51 yen.

BusinessDesk.co.nz

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