June 15 (BusinessDesk) - The New Zealand dollar, which surged to a four-month high overnight following weak US retail sales and inflation data, reversed course to end the day little changed after weaker than expected growth data and a warning about property debt.
The kiwi rose as high as 63.19 US cents overnight before paring its gains today to be little changed at 72.22 US cents as at 5pm from 72.21 cents late yesterday. The trade-weighted index fell to 77.48 from 77.65 yesterday.
The US dollar dropped overnight after figures showed the biggest decline in retail sales in 16 months last month, while consumer prices unexpectedly fell. The data came before the Federal Reserve's statement that raised the fed funds rate as expected and affirmed plans for another hike this year while flagging that it would begin to tackle the bank's massive balance sheet. In New Zealand, gross domestic product grew a slower than expected 0.5 percent in the first quarter while OECD officials cited concerns about high house prices versus incomes.
Mark Johnson, senior dealer at OMF, said weaker-than-expected US retail sales and consumer price index data overnight had "set the cat amongst the pigeons" with some in the market thinking it might spook the Fed into being more dovish. However, the US dollar recovered on the Fed statement.
"This morning GDP printed on the weaker side and that gave the kiwi a bit of a knock, and from there we've had a bit of a warning shot from the OECD chief economist - he said the house price to income ratios were at very elevated levels and warranted concern, and recommended adding a DTI limit to the macroprudential toolkit," Johnson said. "From there the kiwi has tested its intraday lows of 72.09. It's a good rejection of last night's high."
The kiwi dropped to 94.88 Australian cents from 95.76 cents. It fell to 56.64 British pence from 57.01 pence and declined to 4.9063 yuan from 4.9361 yuan. The kiwi weakened to 79.16 yen from 79.69 yen and dipped to 64.36 euro cents from 64.81 cents.
New Zealand's two-year swap rate fell 1 basis point to 2.16 percent while the 10-year swap rate fell 6 basis points to 3.10 percent.
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