Dollar gains vs. Australian dollar after weak retail, trade data across the Tasman

The New Zealand dollar gained against its trans-Tasman counterpart after weaker-than-expected Australian retail and trade data sucked out some of the optimism from yesterday's first-quarter growth that beat forecasts.

The kiwi dollar rose to 92.20 Australian cents at 5pm in Wellington from 92 cents immediately before the release and was up from 91.96 cents yesterday. The local currency declined to 71.29 US cents from 71.46 cents at 8am and 71.69 cents yesterday.

The Australian dollar fell after Bureau of Statistics figures showed April retail sales were little changed from a month earlier, missing expectations for growth of 0.3 percent, while trade figures showed a record of A$3.89 billion as storms kept coal ports closed and reduced the nation's exports. The downbeat data eroded optimism from yesterday's better-than-expected gross domestic product expansion in the first quarter, which reinforced speculation the Reserve Bank of Australia won't cut interest rates further after holding the cash rate steady at 2 percent earlier this week.

"We had some weak data from Australia today, which pushed up the kiwi/Aussie," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "I don't see that progressing too long as we get closer to the RBNZ (policy meeting next week)."

Investors are evenly split on whether governor Graeme Wheeler will cut the 3.5 percent official cash rate at next week's policy review, pricing a 43 percent chance of a reduction, according to the Overnight Index Swap curve.

Speizer said he doesn't think Wheeler will cut, saying it would go against the way the central bank signals changes in policy direction, and that the RBNZ would probably want to measure the data before making a final decision.

New Zealand's two-year swap rate rose to 3.36 percent at 5pm in Wellington 3.29 percent yesterday, and the 10-year swap rate increased to 4.08 percent from 3.9325 percent.

Government data today showed New Zealand's construction activity rose 1 percent in the first quarter, driven by increased activity in residential building work, primarily in the nation's two biggest cities of Auckland and Christchurch.

The kiwi fell to 63.27 euro cents from 64.21 cents yesterday after the European Central Bank lifted its inflation forecast, and as Greece's 300 million euro repayment to the International Monetary Fund looms. It traded at 46.52 British pence from 46.69 pence ahead of the Bank of England policy review.

The kiwi was little changed at 88.73 yen at 5pm in Wellington from 88.85 yen yesterday, and fell to 4.4203 Chinese yuan from 4.4429 yuan. The trade-weighted index decreased to 74.48 from 74.68.

(BusinessDesk)