NZ dollar hits decade low against aussie

The New Zealand dollar hit a decade low against the Australian dollar as weak retail sales and a gloomier economic outlook meant interest rate rises on this side of the Tasman were likely to lag even further behind.

Seasonally adjusted retail sales fell 2.5 per cent in October, more than reversing September's 1.7 per cent gain and weaker than expectations of a 0.4 per cent fall in a Reuters poll. Core retail sales, excluding motor vehicle-related industries, fell a seasonally adjusted 1.6 per cent in October after September's 1.7 per cent rise.

The October fall in total retail sales was the largest in percentage terms in more than 13 years.

The kiwi slid on the poor data, but recovered somewhat until the release of Treasury's Half Year Economic and Fiscal Update which contained more pessimistic forecasts than in the May budget.

By 5pm, the kiwi had fallen to A75.35c, its lowest point since late 2000 and well down from A76c late yesterday afternoon. The NZ dollar has fallen from a high against the Australian dollar above A95c in late 2005.

"The catalyst has been certainly weaker retail sales data, and obviously the six-monthly Treasury update, but the marketplace has pretty much factored that in after comments from the Prime Minister," said ANZ Institutional Bank chief foreign exchange dealer Murray Hindley.

Data out of Australia continued to show strong economic growth in comparison with New Zealand, and the Reserve Bank of Australia's governor had taken a more hawkish stance than RBNZ Governor Alan Bollard.

"Signs that we may see interest rate rises in the new year in Australia, and certainly comments from Bollard that probably we're not going to see any rate hikes until well into 2011, is probably suggesting why we're seeing the switching out of New Zealand to Australia," Mr Hindley said.

The kiwi recovered a touch against the US dollar having slid half a cent after the retail data, and at 5pm was at US74.97c against yesterday's US74.82c.

The kiwi was weaker against the other major currencies, at 0.5601 euro, 62.58 yen and 47.27 pence. The trade weighted index fell to 67.36 from 67.79 late yesterday afternoon.

The domestic market was now waiting for third quarter GDP data due out next Thursday.

- NZPA