NZ dollar extends decline against greenback, euro

NZ dollar extends decline against greenback, euro on weak US data, bond auctions

By Paul McBeth

Jan. 13 (BusinessDesk) – The New Zealand extended losses through local trading after weaker retail sales in the US and strong demand for Spanish and Italian government bond auctions sapped demand for so-called risk-sensitive assets.

The kiwi fell to 79.06 US cents at 5pm from 79.35 cents at 8am and 79.62 cents yesterday. The local dollar declined to 61.63 euro cents at 5pm from 61.88 cents at 8am and 62.59 cents yesterday.

Investors continued to unwind their positions in the kiwi dollar, cashing in some of their profits from as much as a 2.1 percent spike against the greenback this week and a 2.3 percent surge against the euro.

The decline comes after US retail sales grew just 0.1 percent in December, 0.2 percentage points below what a Bloomberg survey of economists was picking, sapping optimism the world’s biggest economy is growing at an accelerating pace. That rallied support for so-called safe haven assets such as the green.

“US retail sales were weaker than expected, and raised concerns about the US GDP momentum for growth which weighed on sentiment,” said Jane Turner, economist at ASB. “We’ve seen an extension from last night’s theme, with a little bit of profit taking” after a strong performance through the week, she said.

The kiwi fell from decade-highs against the euro after Spain sold 10 billion euro bonds, twice the target for the sale, at an average yield of 3.4 percent, down from 5.2 percent in December, while Italy sold 12 million euros of bills at 2.7 percent from 5.9 percent. That helped quell fears about the region’s mounting sovereign indebtedness, which is expected to be the focus for markets over the coming year.

Turner said the kiwi faces “a lot of downside risk” in the coming six months as optimism over Europe’s ability to deal with its debt woes waxes and wanes.

Investors will have more to chew over during trading Asian sessions, with Chinese gross domestic product data due on Tuesday. The New Zealand Institute of Economic Research’s quarterly survey of business opinion and the fourth-quarter consumer price index are also due for release next week.

The kiwi dropped to 76.66 Australian cents from 77.20 cents yesterday, and declined to 60.68 yen from 61.14 yen. It fell to 51.51 pence from 51.91 pence yesterday, and decreased to 70.67 on the trade-weighted index from 71.34.

(BusinessDesk)

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