NZ dollar gains as US retail sales unexpectedly decline, weighing on greenback

Anti-austerity protesters demonstrate in front of the Greek Parliament. Photo / Getty Images

The New Zealand dollar gained as an unexpected decline in US retail sales raised speculation an increase in US interest rates may start later than previously thought, weighing on the greenback.

The kiwi rose to 67.04 US cents at 8am in Wellington, from 66.73 cents at 5pm yesterday.

The trade-weighted index advanced to 70.94 from 70.68 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, declined after a report showed US retail sales slipped 0.3 per cent in June, the weakest reading since February, and surprising economists who expected a 0.3 per cent gain.

The weaker retail data comes after a disappointing employment report for June and a sharp drop in small business confidence, stoking expectations the Federal Reserve may hold off raising interest until December rather than September.

All eyes are on US Federal Reserve chair Janet Yellen who is set to deliver her semi-annual testimony on the economy and monetary policy to the US Congress on Wednesday and Thursday.

Last week she said she still expects the Fed to lift rates this year.

"We already know where the head of the US central bank stands. She believes that rates will rise this year but is undecided on whether that will be in September or December," Kathy Lien, managing director of FX strategy for BK Asset Management in New York, said in a note.

"After (the) disappointing retail sales report, the chance of December tightening has risen."

Today, the focus in Asia will be on a slew of Chinese data releases including second-quarter gross domestic product, and June data for retail sales, industrial production and fixed asset investment.

Economists expect Chinese growth slowed to an annual 6.8 per cent pace in the second quarter, from 7 per cent in the first quarter, according to Bloomberg.

Tonight, traders will be eyeing Fonterra Cooperative Group's GlobalDairyTrade auction where prices for whole milk powder, New Zealand's key export commodity, are expected to fall amid high supply and weak demand.

The New Zealand dollar edged higher to 89.96 Australian cents from 89.86 cents yesterday ahead of a report on Australian consumer confidence today.

The local currency fell to 42.87 British pence from 43.09 pence yesterday after Bank of England governor Mark Carney said the performance of the economy meant interest rate hikes were "moving closer".

The kiwi rose to 60.91 euro cents from 60.64 cents yesterday ahead of a Greek parliamentary vote on bailout conditions agreed with creditors.

The local currency advanced to 82.69 yen from 82.41 yen yesterday.