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NZ dollar held back by 'dire' retail sales; Singapore growth underpins Asia

Thursday 15th April 2010

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The New Zealand dollar was held back by its “dire” retail sales data yesterday after investors’ appetite for Asian currencies was underpinned by a growth surge in Singapore’s economy.

Gains in New Zealand’s currency were held back by an unexpected drop in February’s retail sales, which fell a seasonally adjusted 0.6%, worse than the flat result that was expected.

Singapore reported first-quarter growth of 32%, nearly twice the 18% advance predicted, from a 2.8% contraction the quarter earlier, underscoring support for higher yields around the Asian region.

The kiwi dollar tumbled 1.3% to 98.06 Singapore cents after the Monetary Authority of Singapore said it would shift its exchange rate target to a “modest and gradual” appreciation from its 0% target.  

“There was an overhang from the retail sales, which were dire,” that held back the kiwi, said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

“They weren’t retail sales – they were retail fails.” The kiwi edged up to 71.35 US cents from 71.28 cents yesterday, and slipped to 65.78 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.81. It dropped to 66.52 yen from 66.67 yen yesterday, and declined to 76.30 Australian cents from 76.41 cents.

It inched up to 52.27 euro cents from 52.25 cents yesterday, and was little changed at 46.13 pence from 46.14 pence.  Kelleher said the currency may trade between 71.20 U.S. cents from 71.60 cents today with a slight upward bias after the euro stabilised a little amid the ongoing fears over a potential Greek default.  

The kiwi’s fortunes will be linked to a slew of Chinese data out today, which is expected to show the world’s third largest economy grew 11.7% in the 12 months through March. China’s annual pace of inflation is expected to slow to 2.6% through the same period, from 2.7% in the 12 months through February.  

Global risk appetite was underpinned by strong earnings from investment bank JP Morgan Chase & Co. and chip-maker Intel Corp, with the Standard & Poor’s 500 index up 1.1%.

Federal Reserve chairman Ben Bernanke reiterated that interest rates will stay low for an extended period in his testimony before Congress, while the Federal Open Market Committee’s Beige Book indicated overall activity in the world’s largest economy had “increased somewhat.”

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