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Kiwi falls as Australian home lending declines

The New Zealand dollar followed its Australian counterpart lower after official figures showed home lending shrank across the Tasman in December, in another sign of a slowing economy for New Zealand's biggest trading partner.

The kiwi fell to 83.38 US cents at 5pm in Wellington from 83.54 cents this morning and 83.49 cents on Friday in New York. The currency was almost unchanged at 80.91 Australian cents.

The number of loans granted to build or buy a house in Australia fell 1.5 percent in December from a revised 0.7 percent decline in November, according to the Statistics Bureau.

Even after a disappointing jobs report last week, New Zealand's economic fortunes are seen as improving this year, while Australia's are on the decline as its decade-long mining boom comes off the boil.

The yield on New Zealand's 10-year government bond was 3.46 percent at 5pm in Wellington, 33 basis points above its Australian counterpart, even though the Australian benchmark interest rate, at 3.0 percent, is higher than New Zealand's 2.5 percent Official Cash Rate.

"The kiwi data can be disappointing relative to expectations, but compared to the eurozone and Japan, it's still good," says Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. "The data is doing its best to give you a reason to sell the kiwi."

New Zealand's currency is expected to consolidate this week, with strategists mixed on where they see the kiwi moving in a BusinessDesk survey. Three saw it gaining, two saw it little changed and two pick a decline.

The main local event this week is fourth-quarter retail sales on Friday, which is likely to show a 1.1 percent gain in volumes, according to a Reuters survey, bouncing back from a 0.4 percent decline three months earlier.

Ahead of that release, figures tomorrow are expected to show spending on electronic cards in January rose 0.3 percent. Six monthly corporate earnings will also build over the next few weeks.

Markets in China and Japan were closed for the lunar new year, leading to thinner trading volumes than usual.

New Zealand's currency fell to 77.13 yen from 77.40 yen last week and dropped to 62.33 euro cents from 62.50 cents. It declined to 52.74 British pence from 52.86 pence last week, and the trade-weighted index decreased to 75.63 from 75.77.

(BusinessDesk)