NZ dollar climbs 1 US ct on strong retail sales, Chinese support for Europe

By Paul McBeth

Feb. 15 (BusinessDesk) – The New Zealand dollar rose 1 US cent in the local trading session after stronger-than-expected retail sales data and Chinese government support for Europe stoked investors’ appetite for higher-yielding, or riskier, assets.

The kiwi climbed to 83.84 US cents at 5pm from 82.80 cents just after 8.30am and 82.96 cents yesterday. The trade-weighted index rose to 73.84 from 73.03 yesterday.

Investors flocked to the kiwi dollar after government figures showed New Zealand retails sales grew 2.2 percent in the last three months of 2011, beating estimates of 0.8 percent quarterly growth. That optimistic sentiment was bolstered after the People’s Bank of China Governor Zhou Xiaochuan said the world’s second biggest economy will help Europe resolve its sovereign debt crisis.

“Retail sales were much better than expected, and that caused the big boost,” said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. “The kiwi and the Aussie gains shot up higher in the wake of the announcement coming out of China” that it will prop up Europe, he said, referring to the trans-Tasman currencies colloquially.

China’s involvement will help settle nerves over European nations’ ability to avoid defaulting on debt repayments, and should continue to stoke investors’ appetite for so-called risk sensitive assets.

The kiwi hit a high for the week, and “it’s looking like 84 US cents is pretty reasonable,” Tennent-Brown said.

Today’s consumer spending data comes after local figures showed New Zealand’s property market is slowing improving, and there are signs the economy is continuing to gradually recover.

“We’re seeing a long, slow, gradual recovery, but it’s definitely moving in the right direction,” Tennent-Brown said.

Traders will be looking forward to the release of the minutes from the Federal Open Market Committee last meeting, which will probably give a clue as to how the Federal Reserve expects the world’s biggest economy to track.

Reserve Bank of New Zealand Governor Alan Bollard is due to give a speech on Friday, which is expected to talk up New Zealand’s economy in relation to the rest of the world.

The New Zealand Local Government Funding Authority held its debut auction today, and was overbid by 4.4 times. The funding agency is expected to tap foreign investors now it has completed its first debt sale.

The New Zealand dollar rose to 63.66 euro cents from 63.06 cents yesterday, and gained to 53.32 pence from 52.82 pence. It rose to 78.02 Australian cents from 77.62 cents yesterday, and advanced to 65.81 yen from 64.61 yen.

(BusinessDesk)

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