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Kiwi dips after rally

NZ NewswireNZ Newswire 14/08/2016

The New Zealand dollar briefly rallied in the United States on weaker-than-expected US retail sales but dropped back again on Monday morning.

The kiwi dollar traded at US71.86 cents as at 8am in Wellington, from US72c in late New York trading on Friday.

The kiwi climbed as high as US72.53c after figures showed little changed US retail sales for July against forecasts for a 0.4 per cent gain. The trade-weighted index slipped to 76.15 from 76.30 at the end of last week.

The market will be watching a reading of the services sector due out on Monday after the BNZ-BusinessNZ performance of manufacturing index fell 1.8 points to a seasonally adjusted 55.8 in July, extending an expansion that is being underpinned by the construction industry.

Retail sales rose a stronger-than-expected 2.3 per cent in the second quarter, seasonally adjusted, and the PSI is also expected to remain in expansion mode.

"Until NZD's growth story deteriorates or the USD finds more sustained support (which will require a better data signal than the latest retail sales figure), the NZD will remain a 'buy on dips' even with the RBNZ in the process of narrowing yield differentials," ANZ senior economist Philip Borkin said in a note.

"New Zealand's growth story looks solid, particularly relative to many others. In that environment, it is hard to see the NZD falling far even with the RBNZ in the process of narrowing interest rate differentials."

On Monday morning, the kiwi traded at 93.81 Australian cents from A94.12c in New York on Friday.

It dropped to 4.7634 yuan from 4.7733 yuan and fell to 72.69 yen from 72.84 yen. The local currency declined to 55.56 British pence from 55.77p and slipped to 64.32 euro cents from 64.44c.

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