Weaker than forecast retail sales figures wiped nearly half a cent off the kiwi dollar today as traders argued the prospect of a rate rise had diminished further.
The New Zealand dollar overnight extended its recent move higher against the greenback which has weakened on trade deficit concerns.
But the when sales data showed that the May store sales fell 0.6 per cent on a seasonally-adjusted basis in May against economists's forecasts of a 0.5 per cent rise, the currency was sold in short order.
They said the data on top of yesterday's weak NZIER business confidence put paid to the Reserve Bank's hawkish stance on monetary prices.
"It's getting hard for the bank to run with a potential tightening," said an Auckland dealer.
Dealers said a stronger steer on direction would come from tomorrow's consumer price index data and US trade figures. Economists predict a 0.9 per cent March quarter rise will push the annual CPI up to 2.8 per cent.
Despite this, currency strategist Sue Trinh expects the kiwi to keep inching higher as the US dollar goes through a softer patch.
"One factor that could begin to weigh on the New Zealand dollar as it heads towards the US70c level is that the prospect of an interest rate increase in New Zealand is now extremely slim for the balance of 2005 with data pointing towards a deceleration in growth in the economy over the past few months."
The euro finished in Wellington at US$1.2206 (from US$1.2161 at 5pm yesterday), while the greenback was buying 111.15 yen (111.35). The aussie rose to US$75.55c (US75.10c).
On its crosses, the kiwi was fetching A90.31c (A90.70c), 0.5590 euro (0.5595), 38.47 British pence (38.58), 0.8701 Swiss francs (0.8702) and 75.85 yen (75.80).
The TWI closed at 68.89 (68.92) and the monetary conditions index at plus 942 (944).
On the money markets, 90-day bank bill yields were unchanged at 7.03 per cent. Mid-maturity bond yields continued to fall. July 2009 bond yields fell to 5.85 per cent (5.88) while the ten year April 2015s held on 5.78 per cent.
- NZPA
<EM>Currency:</EM> Weak retail sales figures dent kiwi
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