The New Zealand dollar rebounded sharply today after stronger than expected retail sales.
It closed nearly 1 cent higher than yesterday's close at US62.32c after retail sales rose a seasonally adjusted 1.9 per cent in February, on January, against economists' forecasts of a 0.3 per cent lift.
Dealers said the news triggered a classic short squeeze.
"The retail sales turned the market on its head," said ANZ Investment bank chief dealer Murray Hindley.
"It caught the market by surprise -- the strength of it."
The data came on top of manufacturing figures that showed activity increased in March, with the ANZ Business New Zealand Performance of Manufacturing Index (PMI) rising 2.3 points to 53.5.
Dealers said the news pointed to New Zealand's recession being shallow and short, suggesting the easing in interest rates may be mild.
The kiwi also jumped sharply against the Australian dollar, ending at A85.39c compared to A83.97c yesterday.
The aussie closed at US72.98c from US73.29c here yesterday.
The US dollar steadied against the majors, keeping the previous day's gains, though some traders said the market was girded to take profits from the currency's recent rise ahead of the Easter holiday weekend.
The dollar firmed after the US trade deficit for February came in narrower than expected at US$65.7 billion ($107.93 billion) yesterday, the third widest on record but below economists' estimates of US$67.5 billion.
Uncertainty about the timing of the end to the Federal Reserve's tightening cycle and when the Bank of Japan will raise interest rates was also seen keeping the dollar in narrow ranges.
"It still comes down to rate differentials," said a trader at a Japanese trust bank.
"The market is unsure if US interest rates are rising because of concern about capital flowing out on the deficit problems or because of solid growth prospects," he said.
- REUTERS
<EM>Currency:</EM> Dollar rebounds sharply
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