Kiwi dollar falls as US retail buoys greenback

The New Zealand dollar fell as the greenback gained on stronger than expected retail sales in the US while American consumers regained their confidence as the world's largest economy climbs out of its worst recession since World War II.

The Dollar Index, a measure of the greenback against a basket of five trading partners, climbed 0.7 per cent to 76.03 after US retail sales surged 1.3 per cent last month, ahead of the 0.6 per cent gain forecast by economists.

American consumers were also more upbeat than expected as the University of Michigan survey rising to 73.4 compared to the predicted 68.8. The gains in the US dollar continue the trend for the currency to gain on positive news for America's economy after it broke down for much of this year.

"The markets have been far too pessimistic on the US economy - the Fed will raise rates at some stage and too many people are on the same position," said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

"The kiwi's been pretty quiet overnight, as has the Aussie, with most of the volatility in the Euro," he said, referring to the trans-Tasman currencies colloquially.

The kiwi slipped to 72.38 US cents from 72.63 cents on Friday in New York, and edged up to 65.20 on the trade-weighted index, or TWI, a measure of the currency against a basket of six trading partners, from 65.15.

It slipped to 64.33 yen from 64.48 yen last week, and gained to 79.49 Australian cents from 79.26 cents. It gained to 49.50 euro cents from 49.25 cents on Friday, and was little changed at 44.54 pence from 44.53 pence.

Kelleher said the currency may trade between 72.20 US cents and 72.75 cents today and will probably remain range-bound until it's known whether the US$3.5 billion Nakheel PJSC Islamic bond will default today.

"If Nakheel fails, US$2 billion in associated defaults will happen straight away," Kelleher said.

The problems at Dubai World dragged down confidence about the state of the world's economic recovery last month with several U.K. and European banks expected to be exposed to the state-owned investment company.