Kiwi hits post-float high on TWI after retail sales jump in 4Q

The New Zealand dollar jumped to a post-float high on a trade-weighted basis and is poised for a 1.7 percent weekly gain after better-than-expected retail sales gave investors yet another reason to buy the local currency.

The kiwi rose to 77.15 on the trade-weighted basis from 76.88 yesterday, and climbed as high as 77.46 surpassing the mid-2007 level when former Reserve Bank governor Alan Bollard intervened in currency markets.

It jumped to 85.07 US cents from 84.80 cents this morning and 84.74 cents yesterday and is heading for a 1.8 percent weekly gain against the greenback.

Government figures showed the volume of New Zealand retail sales advanced 2.1 percent in the final three months of last year, surpassing economists' expectations and sending a fresh wave of demand for buyers of the local currency.

The kiwi has become a favourite among investors as New Zealand's economy is expected to grow, with interest rates more likely to rise than fall, giving bigger and safer returns than elsewhere.

"The kiwi is a steam-train and no-one wants to stand in front of it," says Mike Jones, currency strategist at Bank of New Zealand in Wellington. "It is fundamentals that have got us here and the fundamentals should keep improving."

Today's data follows on from upbeat consumer confidence and manufacturing surveys that gave the currency a fillip yesterday. Still, that is unlikely to prompt intervention from the Reserve Bank, which has to be able to get a tangible result when it plays the currency markets.

Finance Minister Bill English yesterday likened such a move to using a "peashooter in a warzone".

The kiwi rose to a new post-float high against the pound at 55.08 British pence, with the latest round up upbeat local data underpinning New Zealand's strength after Bank of England governor Mervyn King this week flagged more economic weakness going hand-in-hand with high inflation.

It traded at 54.82 pence at 5pm in Wellington from 54.58 pence yesterday.

The kiwi slipped to 78.62 yen at 5pm in Wellington from 79.16 yen yesterday when the Bank of Japan kept the benchmark interest rate at 0.1 percent and reaffirmed its aggressive monetary easing to achieve annual inflation of 2 percent.

Official figures yesterday showed Japan's economy unexpectedly shrank in the fourth quarter, for an annualised contraction of 0.4 percent.

Today's rally saw the New Zealand currency rise above 82 Australian cents for the first time since July 2010. It rose to 82.07 cents at 5pm in Wellington from 81.85 cents yesterday, and advanced to 63.66 euro cents from 63.03 cents.

(BusinessDesk)