WELLINGTON/SYDNEY: The Australian dollar fell against its US counterpart on Wednesday after weaker-than-expected retail sales added to the case for further rate cuts by the central bank, and dragged the New Zealand dollar lower.
The Aussie slips to $0.9782, from $0.9856 in early trade. Support seen at $0.9770, the 61.8 pct of the $0.9690-$0.9898 move.
It dropped nearly half a cent to a session low of $0.9775 after retail sales for April fell 0.2 pct, missing forecasts of a 0.2 percent rise.
Interbank futures are fully pricing a 25 bps-cut next week when the Reserve Bank of Australia holds its monthly monetary policy meeting. Swap markets are pricing an one-in-four chance of an aggressive 50 bps easing.
The RBA surprised many in May when it cut rates by 50 bps to 3.75 percent.
Disappointing retail data poured cold water on a solid rise in construction work done which augurs well for Q1 GDP due next week. Construction work done rose 5.5 pct in the first quarter, outpacing forecasts of a 3 pct increase.
The New Zealand dollar sits around $0.7590/95 from a late New York level of $0.7635, after briefly touching a session low of $0.7588 as it got dragged by the Aussie.
The kiwi seen in a $0.7450 to $0.7700 range, with immediate support at $0.7580 and below that $0.7550, with $0.7650 set to cap the topside.
The Antipodean currencies have been hit hard since the escalation of the debt crisis in Europe.
While a short-covering rally in the past week has lifted the Aussie and the kiwi from deep losses suffered this month, market participants see the risk of more losses on rising speculation that Greece may leave the euro zone. Spain is another growing source of worries with its debt-laden banks.
Aussie & kiwi on track to post larger monthly losses since September with the Aussie down 5.6 pct in May, having touched a six-month trough of $0.9690 last week. Kiwi has fallen 7 percent.
The Antipodeans give ground to the euro and yen, although the kiwi fares slightly better.
Aussie softens against the NZ dollar after the retail data, easing 0.2 percent to NZ$1.2874, close to a two-week low.
New Zealand building consents dip 7.2 percent in April, after an outsized 19 pct rise in March, but underlying trend shows a modest improvement from depressed levels, although the data not seen giving any reason for a change in central bank rates.
New Zealand government bonds prices extend their opening soft tone, with yields 4 basis points higher along the curve.
Jittery markets and the prospect of more easing sends Australian government bonds higher with the three-year Australian contract up 0.05 point to 97.670, approaching last week's record high of 97.700. The 10-year contract adds 0.035 points to 96.955.