NZ dollar advances as greenback weakens on disappointing US retail sales

File photo / NZ Herald

The New Zealand dollar advanced after weaker-than-expected US retail sales data stoked speculation the Federal Reserve will delay hiking interest rates.

The kiwi rose to 74.68 US cents at 8am in Wellington, from 73.89 cents at 5pm yesterday.

The trade-weighted index increased to 74.62 from 73.89 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, touched its lowest level in more than three months after a report showed US retail sales were unchanged in April, suggesting the world's largest economy is struggling to rebound from a slower first quarter.

That increased expectations that the Fed is likely to hold off raising interest rates until consumer sentiment improves.

"April retail sales were disappointing," ANZ Bank New Zealand senior economist Sharon Zollner and senior FX strategist Sam Tuck said in a note.

"Given unimpressive US data of late, ANZ now expect the first Fed hike in September rather than June."

ANZ expects the kiwi to trade between 74.10 US cents and 75.30 cents today.

In New Zealand this morning, the BNZ-BusinessNZ Performance of Manufacturing Index and Statistics New Zealand first-quarter retail sales data are scheduled for release.

First-quarter retail sales volumes are expected to increase 1.4 per cent from the previous quarter, as prices rose 4.9 per cent, according to a Reuters survey of economists.

"A strong number may only serve to contrast with last night's disappointing US retail data, and help maintain positive near-term New Zealand dollar momentum," Bank of New Zealand senior market strategist Kymberly Martin said in a note.

The kiwi increased to 47.44 British pence from 47.10 pence yesterday.

The Bank of England in its quarterly inflation report yesterday downgraded its growth forecasts over the next three years, citing the outlook for higher interest rates, a stronger currency and weaker house building and productivity.

It reduced its 2015 gross domestic product forecast to 2.5 per cent from its February forecast of 2.9 per cent, and lowered its expectation for 2016 to 2.6 per cent and for 2017 to 2.4 per cent.

The New Zealand dollar slipped to 92.12 Australian cents from 92.59 cents yesterday, advanced to 65.84 euro cents from 65.69 cents and gained to 88.97 yen from 88.57 yen.