NZ dollar holds near two-week low as global concerns trump strong retail sales
By Paul McBeth
Aug. 14 (BusinessDesk) - The New Zealand dollar held near a two-week low after stronger-than-expected retail sales failed to spur optimism among investors who are downbeat about global growth prospects.
The kiwi traded at 80.96 US cents at 5pm in Wellington from 81.90 cents at 8am, down from 81.14 cents yesterday. The trade-weighted index declined to 72.85 from 72.98 yesterday.
New Zealand volume of retail trade grew 1.3 percent in the June quarter, almost twice the expected pace, as local consumers ramped up spending on cars and spare parts in the period. Investors, though, are concerned not enough is being done to lift global growth, as evidenced by Japan's economy growing at a slower-than-expected pace last quarter.
Retail sales "was a strong number and shows the underlying sentiment in the market," said Imre Speizer, market strategist at Westpac Banking in Auckland. "Had it been a negative surprise, you would've seen a much bigger sell-off in the kiwi - it shows us the market is more vulnerable to the downside."
Speizer expects the kiwi dollar will extend its decline, breaking the next resistance level at 80.80 US cents in a day or two, and heading lower after that.
Traders have been paring back their long positions, where they bet on an asset appreciating, in the trans-Tasman currencies in the absence of policy direction until the central bankers' summit at Jackson Hole, Wyoming on Aug. 31, Speizer said.
Bloomberg data shows the correlation between the Australian and New Zealand dollars and global stocks fell from a record high. The link between the currencies and raw material costs is also fading.
The kiwi-greenback link to global stocks has fallen to 0.72 yesterday from a Jan. 9 record of 0.91. A value of 1 indicates the assets move in unison.
The New Zealand dollar rose to 77.02 Australian cents from 76.84 cents yesterday and fell to 51.59 British pence from 51.75 pence. The kiwi fell to 65.54 euro cents from 66 cents and was unchanged at 63.52 yen.