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Monday in Asia, the New Zealand dollar slumped against its major counterparts amid a report that showed New Zealand's retail sales unexpectedly declined in July, suggesting that the economy may face a slow recovery from the worst recession in three decades.
The NZ dollar slipped to a 10-day low against the yen and a 4-day low against the greenback and the euro.
Retail sales fell a seasonally adjusted 0.5 percent on month in July, Statistics New Zealand said today. Economists had forecast a 0.4 percent monthly increase after the 0.1 percent gain in June.
Core retail sales, which exclude automobile sales, also fell 0.5 percent on month to 20 million New Zealand dollars - missing expectations for a 0.5 percent increase after the 0.4 percent fall in the previous month.
Today's report reinforces last week's comments from Reserve Bank of New Zealand Governor Alan Bollard, who said the medium term outlook for retail spending "remains weak" as unemployment continues to rise.
Indeed, the jobless rate hit a 9-year high of 6% in the second quarter and central bank expects it to surpass 7% by the end of next year. Bollard also linked the continued turmoil in the labor market to the New Zealand dollar, saying the stronger currency puts business profits "under pressure" and warned that "If the exchange rate were to continue its recent appreciation.the sustainability of the present recovery will be brought into question."
Bollard kept the benchmark interest rate unchanged at record-low 2.5 percent on September 10 and said he doesn't plan to raise borrowing costs until late 2010.
Bollard also said that the economy may grow just 0.1 percent in the three months ending September 30. He expects consumer spending to contract in the year ending March 31.
The NZ dollar, which closed last week's trading at 64.03 against the yen, fell to 63.10 in Asian deals on Monday. This set the lowest point for the kiwi since September 04. On the downside, 62.6 is seen as the next target level for the kiwi.
The kiwi-yen pair has depreciated more than 2% since it reached a 12-day high of 64.71 on September 07 as the downward revision in Japan's second quarter GDP on Friday prompted investors to seek the safety of the Japanese currency.
During Asian deals on Monday, the New Zealand dollar slipped to a 4-day low of 0.6971 against the U.S. currency. If the kiwi-greenback pair weakens further, it may likely target the 0.692 level.
After hitting a 6-1/2 -year low of 0.490 in March 2009, the kiwi strengthened 31% against the U.S. currency and reached a new 1-year high of 0.7092 on September11, as prospects of a global economic revival spurred demand for higher-yielding assets.
But the kiwi fell today, retreating from last week's levels, its strongest since August 2008, following a decline in the prices of commodities, which account for more than half of the nations' exports.
Oil fell more than a dollar toward $68 a barrel today as a rebound in the U.S. dollar and increasing concerns that prices may have run ahead of market fundamentals extended last week's late sell-off.
The dollar's reversal sent U.S. crude for October delivery tumbling 94 cents to $68.35 a barrel at 10:29 pm ET. London Brent crude fell 68 cents to $67.01 a barrel.
Retreating from last week's 13-month high of 2.0579, the New Zealand dollar dropped 1.3% against the euro and fell to a 4-day low of 2.0858 in Asian deals today. The next downside target level for the kiwi is seen at 2.10. At Friday's close, the euro-kiwi pair was quoted at 2.0595.
In Asian deals on Monday, the New Zealand dollar declined to 1.230 against the Aussie. That was down 0.7% from Friday's 2-week high of 1.2214. If the kiwi slides further, it may test near term support around the 1.243 level.
The aussie-kiwi pair lost 1.3% last week as reports showed that retail sales in Australia unexpectedly fell in July and home-loan approvals ended a record nine-month run of gains as the effect of government stimulus spending wanes.
In addition, Australia's employment fell in August by more than economists estimated, increasing speculation the nation's central bank won't raise interest rates anytime soon.
The Australian dollar also plummeted against its major counterparts today as a decline in most Asian stocks diminished demand for higher-yielding currencies.
In Monday's session, Tokyo stocks fell 2.23%, Australian stocks lost 1.03%, Hong Kong's Hang Seng slipped 0.88% and South Korea's Kospi declined 0.83%.
During Asian deals on Monday, the Aussie tumbled to a 4-day low of 0.8551 against the U.S. currency and 1.6999 against the euro. The next downside target level for the aussie is seen at 0.847 against the greenback and 1.724 against the euro. The aussie-greenback and the euro-aussie pairs were worth 0.8633 and 1.6899, respectively at Friday's close.
The Aussie, which closed last week's trading at 78.27 against the yen plunged to an 11-day low of 77.38 in Asian deals on Monday. If the aussie-yen pair drops further, it may likely target the 76.4 level.
The Australian currency has fallen more than 3% against the yen after it reached a new multi-week high of 80.04 on September 09.
In Asian trading on Monday, the Aussie slipped to a 4-day low of 0.9277 against the Canadian dollar. This may be compared to Friday's close of 0.9307. On the downside, 0.920 is seen as the next target level for the aussie.
A report released by the Australian Bureau of Statistics said today that housing finance for owner occupation, which excludes alterations and additions, dropped a seasonally adjusted 1.7% month-on-month in July. Owner occupied housing commitments decreased to A$16.88 billion from A$17.18 billion in the preceding month.
At the same time, personal finance fell 0.8% to A$6.85 billion and commercial finance decreased 1% to A$25.86 billion. However, lease finance rose 30% to A$436 million, all in seasonally adjusted terms.
In the upcoming European session, the Euro-zone industrial production for July and the employment report for the second quarter are expected.
Across the Atlantic, the Canadian capacity utilization report for the second quarter is due at 8:30 am ET.
As there are no major economic reports due from the U.S. economy, investors will closely watch the speeches by Richmond Federal Reserve Bank President Jeffrey Lacker and the San Francisco Fed's president Janet Yellen in the afternoon.
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