Kiwi Steams Ahead on Upbeat Retail Sales

Kiwi price action held within range between its multi-year high of 0.7873 and a low of 0.7843, trading at 0.7857 versus its American counterpart in midday Wall Street action.
Stronger-then-forecasted retail sales data stoked Kiwi early in the US session, as the report showed sales increasing twice as fast as expected in May.

Headlines:
N.Z. Dollar Heads for Sixth Weekly Gain on Carry Trade Appeal
New Zealand’s dollar is headed for its sixth straight week of gains after the Bank of Japan kept interest rates on hold, underpinning the appeal of higher- yielding currencies.
http://www.bloomberg.com/apps/news?pid=20601081&sid=aw9n0i4FsIZg&refer=australia
-Source: Bloomberg
NZ stocks: Shares take heart from Wall St rise
Optimism on Wall St filtered through to the local sharemarket today, with a moderate 0.1 per cent rise in the benchmark NZSX-50 index. Optimism on Wall St filtered through to the local sharemarket today, with a moderate 0.1 per cent rise in the benchmark NZSX-50 index.


-Source: NZ Herald

NZD/USD Recovers
During local time, the NZD/USD traded around the mid 0.7700’s, but overnight it climbed back above 0.7800 on USD weakness. Institutions selling on risk aversion pushed it lower while investors seeking high yields took advantage of the NZD at lower levels. Yesterday, REINZ housing data showed house prices fell from their record highs in June, suggesting that the housing market may be cooling. The national median house price fell 0.7% in June to NZD347,500, although it was up 12.1% on a year ago and the median number of days it took to sell a house remained steady at 30 days
http://tvnz.co.nz/view/page/410965/1228360
-Source: TVNZ.CO.NZ

Market Activity:
Currency Market - NZD:
Kiwi price action held within range between its multi-year high of 0.7873 and a low of 0.7843, trading at 0.7857 versus its American counterpart in midday Wall Street action. Stronger-then-forecasted retail sales data stoked Kiwi early in the US session, as the report showed sales increasing twice as fast as expected in May. Such upbeat data prompted speculation of further tightening from the RBNZ as futures markets are now pricing in a 40 percent chance of rate firming at the July 26th meeting. Boasting the highest borrowing rate of all traded industrialized nations (after Iceland) of 8 percent, analysts? content that future hikes are in order to quell domestic housing demand buoying inflation.

Equity Market - NZSX-50 Index:
New Zealand equities eased off intra-day highs of 4269.63 losing 0.1 percent before reaching the closing bell at 4236.70. Among the sessions best performers was shares in New Zealand?s largest telecom firm Telcom Corp. (TEL.NZ) rising 0.9 percent to N$4.66. Boosted by news that the NZ government will continue operational distance from the corporation?s units, Telecom added 3.23 points to the NZX 50 Index. In spite of of strikingly upbeat retail data and a Citigroup upgrade to “hold” from “sell”, Pumpkin Patch Ltd. (PPL.NZ) New Zealand?s second-largest public retailer lost 0.3 percent closing at NZ$3.42.


Fixed-Income Market - 10-year Government Bonds:
Carry traders cheered inflation laden retail data as it reconfirms market expectations of higher future OCR from the RBNZ. Tracking US Treasury yields lower in the morning session, inflation-weary debt traders sold-off issues on the upbeat news. Yields on the 10-year New Zealand government bond rose 6bp to 6.807 percent.