Dollar rebounds ahead of US data, dairy auction

The New Zealand dollar rebounded ahead of US retail sales data and the latest dairy auction this week, having been driven lower in the wake of weak Chinese trade data this week.

The kiwi traded at 74.60 US cents as at 5:30pm in Wellington, from 74.20 cents at the start of the day and from 74.49 cents yesterday. The trade-weighted index was at 78.70, from 78.60 yesterday.

Traders are awaiting US retail sales figures as they sift economic data for clues on the timing of interest rate hikes in the US economy. Sales climbed 0.6 percent in march, based on a UBS forecast, speeding up from a 0.1 percent decline in the previous month. Locally, a further decline in prices is expected at the GlobalDairyTrade auction overnight Wednesday, which has the potential to weaken the kiwi as it signals lower returns for New Zealand's biggest export commodity.

"If dairy falls more than 5 percent then the kiwi will fall," said Imre Speizer, a strategist at Westpac Banking Corp. On the US economy, he said "more weak data will cause people to start to think there might be a pause" before any interest rate hikes. The first-quarter economic data out of the US, though, is "weather affected", meaning the market is waiting for second-quarter figures for a steer on the world's biggest economy.

The kiwi fell yesterday after Chinese data showed export sales contracted 15 percent in March from the year earlier, while imports shrank 12.7 percent, the third straight month of declines, raising concerns about weak domestic demand.

Following the data, the World Bank lowered its 2015 China growth forecast to 7.1 percent from a previous estimate of 7.2 percent, and its 2016 estimate to 7 percent from 7.1 percent. Asia's largest economy will release its first quarter gross domestic product data on Wednesday. Economists forecast growth slowed to 7 percent in the first three months of the year, the weakest pace in six years, CNBC reported.

The currency didn't move much after the New Zealand Institute of Economic Research quarterly survey of business confidence showed a slight drop in confidence while continuing to point to steady economic growth.

The New Zealand dollar rose to 98.26 Australian cents from 98.14 cents yesterday. The kiwi dropped to 89.47 yen from 89.75 yen and fell to 50.93 British pence from 51 pence. It traded at 70.79 euro cents from 70.33 cents.

(BusinessDesk)