NZ dollar falls after strong bond sales, weak US data

The kiwi was up 77.20 Australian cents from 77.09 cents yesterday. Photo / Dean Purcell

The New Zealand dollar fell against the euro and the greenback following better-than-expected demand for Spanish and Italian government debt and disappointing US retail sales figures.

The kiwi fell to 61.88 euro cents after trading at 62.76 cents yesterday, the highest since the common currency was released in 2002, up from 62.59 cents at 5pm. The local dollar fell to 79.35 US cents, from 79.62 cents at 5pm.

Spanish and Italian borrowing costs declined at auctions, fuelling speculation the European sovereign-debt crisis is easing and European Central Bank attempts to boost liquidity are working. Spain sold 10 billion euro bonds, twice the target for the sale, at an average yield of 3.4 per cent, down from 5.2 per cent in December, while Italy sold 12 million euros of bills at 2.7 per cent from 5.9 per cent.

"We saw debt fears reduced across the euro zone," said Mike Jones, currency strategist at Bank of New Zealand. "There has been some aggressive kiwi-euro selling, with euro sentiment brightening overnight."

"The New Zealand dollar was one of the strongest performing currencies earlier in the week but all that work has been undone."

The ECB left its benchmark rate at 1 per cent, though it is expected to lower borrowing costs by a further 25 basis points to 0.75 per cent by the end of the first quarter, while the Bank of England will keep its main rate at 0.5 per cent, according to economists forecast complied by Bloomberg.

The kiwi weakened against the US dollar after figures showed American retail sales increased 0.1 per cent in December, falling short of the 0.3 per cent gain forecast in a Bloomberg survey of economists, confirming a slowdown in consumer spending for the start of 2012 in the world's biggest economy.

The currency also fell after the ANZ Commodity Price Index, released yesterday, showed prices for the nation's export commodities fell 0.8 per cent in December

In New Zealand, the only economic figures today may be the Real Estate Institute's monthly property sales data.

The kiwi was down 76.8 Australian cents from 77.20 yesterday, it traded at 51.75 British pence from 51.91 pence and 60.89 yen from 61.14 yen.

The trade-weighted index fell to 70.91 from 71.34.