NZ dollar rises to week-high on surge in retail sales, weaker greenback

The New Zealand dollar rose to its highest level in a week after figures showed a record gain in first-quarter retail sales while weaker data in the US overnight drove down the greenback against most major currencies.

The kiwi rose to 75.35 US cents as at 5pm in Wellington, from 75.17 cents immediately before the retail sales data and from 73.89 cents late yesterday. The trade-weighted index rose to 77.12, having earlier touched 77.44, from 76.27 yesterday.

The volume of sales rose a seasonally adjusted 2.7 percent in the three months ended March 31, accelerating from a pace of 1.9 percent in the December quarter, government figures showed. That beat expectations and was a record gain, reducing speculation the Reserve Bank is set to cut interest rates through this year. The kiwi was making gains even ahead of the data, with weaker-than-expected US retail sales helping drive the US dollar index to a three-month low 93.461.

"Those New Zealand retail sales numbers were pretty bumper," said Mark Johnson, senior dealer at OMF. The kiwi broke through resistance at around 75.30 US cents and the next level for resistance is 75.80 cents, he said.

US retail sales were flat in April after rising a revised 1.1 percent in March. Economists had expected a 0.2 percent gain in the latest month and the US dollar fell as a result.

"We're still dealing with a very, very weak US dollar," Johnson said. "US retail sales didn't miss their mark by much. Maybe people are looking for evidence that the rebound is underway and we're not seeing it."

The kiwi didn't move much after the BNZ-BusinessNZ Performance of Manufacturing Index for April showed the second monthly decline to a seasonally adjusted 51.8 from 54.6 in March.

The kiwi increased to 47.79 British pence from 47.10 pence yesterday. The Bank of England in its quarterly inflation report yesterday downgraded its growth forecasts over the next three years, citing the outlook for higher interest rates, a stronger currency and weaker house building and productivity. It reduced its 2015 gross domestic product forecast to 2.5 percent from its February forecast of 2.9 percent, and lowered its expectation for 2016 to 2.6 percent and for 2017 to 2.4 percent.

The New Zealand dollar traded at 92.62 Australian cents from 92.59 cents yesterday and gained to 66.24 euro cents from 65.69 cents. It rose to 89.72 yen from 88.57 yen.

(BusinessDesk)