Dollar falls after retail data shows weak economy

The New Zealand dollar fell to a three-week low today as underlying trends in retail sales data suggested the economy was weak but the focus is turning to an interest rate decision by the Reserve Bank of New Zealand (RBNZ) next week.

By 5pm the NZ dollar was at US75.64c, up from the US75.21c it sank to in afternoon trading. It ended the domestic day little changed from where it started and is down from US76.34c at 5pm yesterday.

New Zealand retail sales data for November today was mixed, with the headline figure above expectation and the number excluding the automotive segment below expectation.

"The 1.5 per cent lift in November retail sales look decent enough at face value. This was slightly above market and our expectations, but overall the detail reveals a still weak underbelly," BNZ economists said.

ANZ said New Zealand data continues to be weak, contributing to the unwinding of the end of year rally in NZ dollar.

The euro and US dollar were continuing their ongoing battle for supremacy with euro winning this week.

Chinese economic data was generally better than expected, prompting speculation that policymakers could tighten further in order to stem inflation pressures. This weighed on commodity prices, dragging commodity currencies lower.

"We think NZ dollar under-performance will continue next week as the RBNZ decision looms," ANZ said.

The RBNZ sets the official cash rate on Thursday. The market is expected to be quiet on Monday with trading reduced by the Wellington Anniversary regional holiday.

The NZ dollar was A76.54c at 5pm from A76.72c yesterday, having dropped to a one-week low around A76.33c during the session.

The NZ dollar also fell to a one-month low around 0.5600 euro from 0.5678 at 5pm yesterday. It was at 62.73 yen from 62.72 yen yesterday, while the trade weighted index fell to 67.85 from 68.37.

- NZPA