NZ dollar gains vs Australian dollar

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The New Zealand dollar rose against the Australian dollar after weak economic data across the Tasman but was little changed against the greenback ahead of the European Central Bank's monetary policy statement.

The kiwi was trading at 90.12 Australian cents as at 5pm versus 89.93 cents at 8am and 90.52 Australian cents late yesterday. It was at 72.02 US cents from 72.25 cents yesterday.

Australia posted a seasonally adjusted trade surplus of A$460 million (NZ$510m) in July, lower than analysts' expectations of a surplus of A$1 billion, and retail sales were flat in July, as consumers pull back on spending.

The slightly weaker data meant the Aussie came off its highs and "we benefited from that. The kiwi/Aussie cross has rallied up a bit from its lows," said Martin Rudings, senior dealer foreign exchange at OMF in Wellington.

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However, "essentially we are treading water until the ECB tonight. Markets are waiting for that," he said.

Investors are waiting for any clues on what the ECB is going to do about their 2.3 trillion euro bond-buying program, known as quantitative easing and what ECB President Mario Draghi has to say about the euro.

"Draghi has to take this opportunity and deliver pretty much a story that sends the euro lower or it's going to be detrimental to his monetary policy. He's doing everything he can to spur inflation and the euro strength is taking that (any benefit) away from him. He needs to communicate to the market there's no rate increases in the foreseeable future," said Rudings.

The kiwi remained weak against the Canadian dollar after the Bank of Canada unexpectedly hiked its benchmark rate by 25 basis points to 1 per cent and Rudings said it won't see any relief in the near term. "I'd say the Canadian dollar probably has a couple more days of doing better on the crosses. It was a bit of shock and caught the market off guard a bit," he said.

The trade weighted index was at 75.04 from 75.42 late yesterday.

The kiwi was trading at 88.07 Canadian cents as at 5pm from 89.57 cents late yesterday. It was unchanged at 78.53 yen and eased to 60.39 euro cents from 60.64 cents. It traded at 55.20 British pence from 55.43 pence and declined to 4.6967 yuan from 4.7226 yuan.

The two-year swap rate rose 2 basis points to 2.13 per cent while the 10-year swaps rose 3 basis points to 3.06 per cent.