New Zealand Dollar Rises to 3-Week High as Retail Sales Surge
April 13 (Bloomberg) -- The New Zealand dollar rose to the strongest in almost three weeks as a government report showed retail sales jumped the most in two years, dousing speculation the central bank will cut interest rates.
The gain in sales was six times more than economists expected 
and signals the economy may recover from a contraction in the fourth quarter. The currency last month fell to the weakest in almost two years as traders bet the risk of recession would spur Reserve Bank of New Zealand Governor Alan Bollard to cut rates this year.
``We're bullish the New Zealand dollar short-term,'' said Alex Sinton, senior currency dealer at ANZ Investment Bank in Auckland. ``It will be hard for Bollard to look at interest-rate cuts with numbers like this.''
The New Zealand dollar fetched 62.33 U.S. cents as of 2:16 p.m. in Wellington from 61.72 cents before the report was released and 61.50 cents in late Asian trading yesterday. It will reach 62.95 cents in the next few days, Sinton said.
Retail sales rose 1.9 percent from January, when they were unchanged, seasonally adjusted, Statistics New Zealand said in Wellington today. The median of economists surveyed by Bloomberg News was for a 0.3 percent gain in February. It was the first increase in three months.
``The New Zealand dollar has seen its lows on a multi month horizon,'' said Adrian Foster, a currency strategist at Dresdner Kleinwort Wasserstein in Singapore. ``Retail sales is clearly supportive'' and will help the currency rise to 63 cents in the next few days, he said.
Slashed Bets
The New Zealand dollar has fallen 8.9 percent this year as concern the economy was slipping into recession spurred overseas investors to switch funds into currencies where interest rates are more likely to rise.
``This report will not change views that the economy is slowing,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. ``Overall, we would presume that the New Zealand dollar is in retracement mode, but as the year unfolds the main direction will still be down.''
Bollard has raised the official cash rate nine times since January 2004 to a record 7.25 percent as inflation accelerated beyond his 3 percent target. On March 9 he said a rate cut was unlikely unless the economy slowed by more than forecast.
Still, 10 of 14 economists surveyed by Bloomberg News April 10 forecast the central bank will respond to a slowdown in the economy by cutting borrowing costs by the end of the third quarter. Three predicted rates to fall as much as 75 basis points by Sept. 30.
`No Room'
Interest-rate-futures traders slashed bets on lower rates after the report. Yields of futures based on the 90-day bank bill rose 10 basis points to 6.84 percent. The contract settles at a three-month lending rate that has averaged 34 basis points above the Reserve Bank's cash rate target in the past year.
The Reserve Bank next meets April 27 with all 14 economists surveyed by Bloomberg forecasting no change.
``Short-term there's no room for a rate cut and that should be supportive for the New Zealand dollar,'' said Sean Callow, a currency strategist at Westpac Banking Corp. in Singapore.
The New Zealand dollar yesterday fell to an almost four-year low against Australia's currency as traders increased bets on higher rates there. It climbed 1.6 percent today, buying A$0.8541 from A$0.8407 yesterday.
