NZ dollar pares gains from strong retail sales, Italian bond auction looms
By Paul McBeth
Nov. 14 (BusinessDesk) – The New Zealand pared gains from unexpectedly strong third-quarter retail sales as investors overcame their initial optimism ahead of the first Italian government bond auction under a new administration.
The kiwi dollar was little changed at 78.80 US cents at 5pm from 78.75 cents at 8am, and up from 78.53 cents in late trading on Friday. The currency spiked as high as 79.30 cents after the strong retail sales data.
The currency got a short-lived boost from today’s third-quarter retail sales figure, which showed the seasonally adjusted volume of consumer spending rose 2.2 percent in the three months ended Sept. 30, according to government data, beating expectations of a 0.7 percent quarterly gain.
The increase came off the back of the Rugby World Cup, which has struggled to register a pick-up in economic data, and the latest release has allayed fears the tournament wasn’t going to offer an injection to the economy.
Still, that comes ahead of an Italian government bond auction, with the new administration looking to sell as much as 3 billion euros of notes maturing in 2016. Former European Central Bank competition commissioner Mario Monti has been appointed as former Prime Minister Silvio Berlusconi’s replacement to prevent the spread of sovereign debt woes into the wider regional economy.
Retail sales “was a lot of World Cup spending on accommodation and food retail,” and isn’t showing a sustained lift in local demand, said Tim Kelleher, head of institutional FX sales New Zealand at ASB Institutional. The kiwi dollar is tracking Europe’s government bond markets and “we’re all becoming bond traders.”
Investor sentiment got a boost in late trading on Friday in New York, with stocks on Wall Street rallying ahead of the Italian government’s announcement.
Still, ASB’s Kelleher warned those gains were on very light trading, with the New York Stock Exchange reporting its fourth-thinnest trading day this year. That means those gains are vulnerable to a reversal, he said.
The kiwi dollar rose from 76.46 Australian cents from 76.38 cents on Friday and gained to 60.79 yen from 60.33. It rose to 57.21 Euro cents from 57.03 cents and gained to 49.01 British pence from 48.86 pence last week. The trade weighted index rose to 68.90 from 68.72 on Friday in New York.