KEY POINTS:
The New Zealand dollar was jolted out of the doldrums today by retail sales data economists described as "through the roof".
Having hit a month-low against the greenback under US72.60c during the day on Friday, the kiwi was up at US73.35c by 8am today.
It then stepped up half a cent to US73.80c on news that retail sales rose a seasonally and inflation-adjusted 3.8 per cent in the March quarter, more than double the 1.8 per cent economists expected.
By 5pm the currency had retreated to US73.73c.
The strong retail sales data in New Zealand came as US retail sales tumbled in April as high petrol prices pinched spending elsewhere.
It implied that the bias was still for interest rate rises in New Zealand at a time when the bias was downward in other countries and therefore that money will continue to flow into New Zealand attracted to the high interest rates.
The US Federal Reserve is widely expected to trim rates from 5.25 per cent late this year.
"It (strong retail sales) increases the probability of interest rate rises but we have to remember this goes up to the end of March. The first tightening was on March 8 and they tightened again on April 26.
"So this doesn't really capture the impact of interest rate increases yet," BNZ chief economist Tony Alexander said.
The NZ dollar also lifted against its Australian counterpart, settling around A88.47c at 5pm from A88.16c at 8am today. It had dropped to an eight-week low around A87.90c late last week.
The kiwi was also stronger against other major currencies, at 0.5442 euro around 5pm from 0.5409 at 5pm on Friday, and 88.63 yen from 87.48. The trade weighted index was at 71.50 from 70.89.
Among the majors, the US dollar slipped against the euro, weighed down by the surprise decline in US retail sales.
But it traded in a relatively narrow ranges and analysts said the currency enjoyed some support as investors were becoming increasingly convinced the Federal Reserve would not cut interest rates any time soon, given its emphasis on inflation.
The market was also cautious about investors cutting back on risky positions like carry trades, in which low-yielding currencies like the yen are used to fund purchases of higher-yielding currencies like the kiwi.
Reuters currency rates:
5pm today 5pm Friday
NZ dlr/US dlr US73.73c US72.93c
NZ dlr/Aust dlr A88.47c A88.04c
NZ dlr/euro 0.5442 0.5409
NZ dlr/yen 88.63 87.48
NZ dlr/stg 37.15p 36.80p
NZ TWI 71.50 70.89
Australian dollar US83.32c US82.82c
Euro/US dollar 1.3548 1.3481
US dollar/yen 120.20 119.92
- NZPA