Kiwi little changed after Australian data, looming ECB

BUSINESSDESK: The New Zealand dollar was little changed in local trading after figures showing better-than-expected consumer spending in Australian and ahead of the European Central Bank’s review of monetary policy.

The kiwi traded at 80.91 US cents at 5pm from 80.87 cents at 8am and 81.04 cents yesterday. The trade-weighted index was little changed at 73 from 72.93.

Traders are awaiting the ECB meeting in Frankfurt tomorrow, where it is expected president Mario Draghi will announce new measures to protect the regional economic union.

Investora shrugged off Australian retail sales, which grew 1% in June, beating the 0.6% growth forecast, after the Federal Reserve disappointed some traders by not announcing more stimulus.

"We've seen no signs of dissent from other ECB policymakers, which in the past we have seen, and the expectations are that we will get something," said Mike Jones, currency strategist at Bank of New Zealand.

"The risk is for disappointment and that would spark some knee-jerk selling, with the kiwi falling, but there's potential for a surprise either way."

He said the currency may trade between 80.20 US cents and 81 cents in the lead-up to the ECB meeting then will take its cue from what Mr Draghi has to say.

"We have the market factoring in more Fed easing, which for the kiwi means it could push up into the 82s, 83s" against the US dollar," Mr Jones said.

Risk-sensitive assets took a knock in Northern Hemisphere trading after Fed chairman Ben Bernanke did not offer any clues about a third round of quantitative easing nor extend the timeframe for near-zero interest rates.

Investors will keep a close watch on the tone of US data, with July non-farm payrolls set for release late tomorrow.

Prices for New Zealand's raw materials fell 0.5% last month, according to the ANZ Commodity Price Index, led by falling wool prices and cheaper beef and lamb. That was offset by slightly higher diary prices in the month.

The latest auction on Fonterra's GlobalDairyTrade platform achieved a 3.5% increase in prices on a trade-weighted basis, only its fourth gain this year.

The kiwi edged up to 66.02 euro cents from 65.94 cents yesterday, and rose to 52.05 pence from 51.75 pence. It gained to 63.48 yen from 63.23 yen yesterday and fell to 77.14 Australian cents from 77.26 cents.