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Dollar gains after stronger retail sales

NZN 15/05/2017 Jonathan Underhill

The New Zealand dollar rose on Monday after figures showed a stronger-than-expected gain in first-quarter retail sales, led by vehicles.

But it is expected to remain in its recent range until this week's dairy auction

The kiwi rose to US68.73c as at 5pm in Wellington from 68.55c in late New York trading on Friday. The trade-weighted index edged up to 74.88 from 74.68, below the RBNZ's latest projected average for the TWI in the June quarter of 76.

Retail sales rose 1.5 per cent, seasonally adjusted, in the first quarter, accelerating from a 0.9 per cent pace three months earlier, government figures showed.

That exceeded the 0.9 per cent rate forecast by economists and saw the kiwi rise against the greenback and the Australian dollar.

Sales of motor vehicles and parts climbed 5.9 per cent in the first quarter.

Traders are divided on whether dairy prices will rise for the fifth auction in a row this week, with the nearest NZX milk powder contract pointing to an increase but with weaker prices indicated by contracts further out along the curve.

Retail sales "were better than the market expected - that's what did it", said Martin Rudings, senior dealer at OMF.

Still, "I suspect the kiwi will not move significantly until the dairy auction. We've seen a lot of selling in milk powder (futures) but the front contract has held up".

The kiwi rose to 53.25 British pence from 53.06 pence on Friday. The local currency gained to 62.86 euro cents from 62.66 cents and climbed to 77.91 yen from 77.65 yen. It was little changed at A92.85c from 92.86c and rose to 4.7417 yuan from 4.7246 yuan.

Two-year swap rates fell 1 basis point to 2.20 per cent and 10-year swaps declined 3 basis points to 3.28 per cent.

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