NZ dollar near month-high before retail sales

The New Zealand dollar climbed above 69 US cents for the first time in nearly a month as investors remained upbeat about the local economy after the central bank hiked rates last Thursday, though today's consumer spending data may pare optimism.

The kiwi climbed to its highest level since May 18 against the greenback after the Reserve Bank signalled it has embarked on tighter monetary policy settings, hiking the official cash rate a quarter-point to 2.75 per cent last week.

Still, data out today is expected to show consumer spending excluding motor-related retail shrank 0.2 per cent in April, according to a Reuters survey.

Central bank governor Alan Bollard said people have been reluctant to start splurging, in what he described as a "sluggish recovery" in household consumption.

"The market's given the kiwi a boost since the Reserve Bank raised rates on Thursday - you've got to say it's been supportive for the currency," said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

Weak retail sales data is expected today, and it the figures fall short of expectations, "the kiwi's going to get bashed," he said.

The New Zealand dollar climbed to 69.08 US cents from 68.69 cents on Friday in New York, and gained to 67.30 on the trade-weighted index of major trading partners' currencies from 66.91. It jumped to 63.46 yen from 62.92 yen on Friday, and edged down to 80.95 Australian cents from 81 cents. It advanced to 57 euro cents from 56.62 cents last week, and increased to 47.48 pence from 46.78 pence.

Kelleher said the currency may trade between 68.80 US cents and 69.50 cents, and will struggle to get above 70 cents this week.

Optimistic investor sentiment held up over the weekend, with the European Central Bank board member Jurgen Stark saying markets have exaggerated fears about Europe's sovereign debt crisis, and Italy held a successful auction for five-year government bonds, selling seven billion euros of securities.

Kelleher said the kiwi is looking stretched against the euro, and will probably come back down, with too many people taking short positions on Europe's common currency. A short position is where a trader sells an asset in the expectation they can buy it back later at a cheaper price.