NZ dollar gains as Australian retail sales fall

BUSINESSDESK: The New Zealand dollar gained against its trans-Tasman counterpart after figures showed Australian retail sales shrank last month, sapping investors' appetite for the so-called Aussie. 

The kiwi is headed for a 7% monthly decline against the greenback.

The kiwi climbed to 77.60 Australian cents at 5pm from 77.44 cents at 8am and 77.29 cents yesterday. It was little changed at 76.03 US cents from 76.10 cents yesterday.

Australian retail sales shrank 0.2% in April, falling short of the 0.2% growth forecast by economists, government figures showed.

Australia has been contending with a two-speed economy over the past year, as its resources sector charges away while its service sector and household demand remain subdued.

"The markets seemed to react to the headline (retail sales) figure, and that helped the kiwi/Aussie cross rate a little," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney, referring to the currencies colloquially.

"The kiwi should get up to 80 Australian cents in the course of the year" barring any meltdown in Europe, he said.

New Zealand's currency is poised for a 7% monthly decline against the greenback after Europe's deteriorating financial stability weighs on investor confidence.

Traders have been eschewing risk-sensitive assets since Greece's election failed to deliver any clear winner and Spain's banking system looks likely to need a major recapitalisation.

"The kiwi fell about 10 US cents in the end and I think when you get that sort of move, unless you have GFC [global financial crisis] style news flowing for months on end, inevitably you'll get some consolidation," Mr Tennent-Brown said.

"If we start to see things pick up, then the kiwi and Aussie should be able to rise."

Investors will be watching for any new headlines about Spain's banking system and the likelihood of it needing a regional bail-out, ahead of Friday's Chinese manufacturing figures and US employment numbers on the same day.

The trade weighted index increased to 69.48 from 69.36 yesterday, and is poised for a 4.5% monthly decline.

The New Zealand dollar increased to 48.68 British pence from 48.55 pence yesterday and was little changed at 60.41 yen from 60.47 yen.