The New Zealand dollar jumped almost one US cent overnight after US retail sales missed expectations, raising concern about slowing growth in the world's largest economy.
The kiwi touched a high of 75.52 US cents, and was trading at 75.18 cents at 8am in Wellington, from 74.61 cents at 5pm yesterday. The trade-weighted index advanced to 79.03 from 78.69 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, declined after a report showed US March retail sales rose 0.9 percent, lagging behind a Reuters forecast of 1 percent. Core retail spending, a gauge of consumer spending for gross domestic product, advanced 0.3 percent, missing expectations for a 0.5 percent gain. That's likely to temper bets the Federal Reserve will raise interest rates as early as June.
"The market was disappointed in the bounce back in US March retail sales last night, which at face-value reduces the probability of the Fed starting a rate hiking cycle in June and saw broad-based US dollar weakness," ANZ Bank New Zealand agri economist Con Williams and senior FX strategist Sam Tuck said in a note. "NZD/USD leapt back into life, rising nearly 1 US cent before softening a touch. This confirms that part of the fate of NZ exporters and farm outlooks for 2015/16 will be driven by the US data flow and the Fed."
While weaker first quarter economic data in the first three months of the year is likely to weigh on US first quarter GDP, the figures suggest transitory and weather-related factors may be to blame, and those are beginning to wane, ANZ said. The US has had an unusually snowy winter and labour disruptions at its key West Coast ports.
The gain in US retail sales was the largest since the same month last year and snapped three straight months of declines. Tonight, in the US, traders will be eyeing the Fed Beige Book for a gauge of economic conditions and the New York Empire survey of manufacturing.
ANZ expects the New Zealand dollar to trade between 74.10 US cents and 75.90 cents today.
In New Zealand today, Statistics NZ releases the food price index for March at 10:45am and Reserve Bank deputy governor Grant Spencer is scheduled to give a speech on housing to the Rotorua Chamber of Commerce at 12:30pm.
Traders will be looking for any clues on whether the Reserve Bank plans any macro prudential measures to slow the Auckland housing market after Real Estate Institute figures yesterday showed Auckland house prices jumped 13 percent in March from the year earlier month, as supply fails to meet demand amid record migration.
At 2pm this afternoon, the focus will be on Chinese data including first-quarter GDP and March reports on retail sales, industrial production and fixed asset investment. China is Asia's largest economy and New Zealand's biggest trading partner.
Early tomorrow morning, traders will be eyeing the latest GlobalDairyTrade auction, with NZX dairy futures suggesting prices will decline. Dairy products are New Zealand's largest commodity export.
The New Zealand dollar advanced to 89.79 yen from 89.49 yen yesterday after Koichi Hamada, an economic adviser to Japanese Prime Minister Shinzo Abe, sought to clarify his earlier comments which suggested the government viewed the yen as too weak. Hamada told Reuters he was referring to the purchasing power parity-implied rate, not the spot market rate.
The kiwi slipped to 70.60 euro cents from 70.69 euro yesterday ahead of the European Central Bank policy decision tonight. The local currency was little changed at 50.87 British pence from 50.90 pence yesterday and advanced to 98.57 Australian cents from 98.24 cents.