Australian dollar rises on strong retail sales, NZ dollar at 7-week lows

[SYDNEY] The Australian dollar edged ahead on Wednesday as investors cheered better-than-expected retail sales data after months of tepid growth, while Brexit concerns lifted the Aussie to its highest against the pound in more than three years.

The Australian dollar rose 0.26 per cent to US$0.7636, but still clocked a 10th straight session trapped in a 76 to 77 US cent band after again failing to break higher on Tuesday.

Australian retail sales grew 0.4 per cent in August, double forecasts and a relief after a flat July.

"The outlook for retail sales from a macroeconomic perspective remains positive, without the likelihood of breaking any speed records," said National Australia Bank Economist Tapas Strickland.

The sales data may provide some comfort to the Reserve Bank of Australia (RBA) with the futures market pricing in only a 24 per cent chance of another cut after the central bank held rates at a record low 1.5 per cent on Tuesday.

The Aussie continued its winning streak elsewhere.

It touched a three-year peak against the pound on growing worries about Britain's impending exit from the European Union. It also held near a one-month high against the yen at 78.51 yen and added 0.5 per cent against its New Zealand counterpart, its third straight day of gains.

The New Zealand dollar fell on Wednesday to its lowest level since mid-August, dragged down by a reversal in global dairy prices.

The kiwi sank to US$0.7184, from as high as US$0.7286 before the auction, which was held in the early hours of Wednesday morning.

The fortnightly Global Dairy Trade auction showed prices for dairy products, the country's largest goods export earner, dipped 3 per cent after rising for four consecutive auctions.

"A decline at this auction could raise fears that the recent price run-up may be unwound, just like we have seen on a couple of occasions over recent years," said Kim Martin, senior market strategist at BNZ.

The recent rebound in dairy was clear in ANZ Bank's commodity price index which jumped 5.1 per cent in September.

New Zealand government bonds eased, sending yields six basis points higher at the long end of the curve.

Australian government bond futures slipped in line with US Treasuries. The three-year bond contract fell four ticks to 98.44, while the 10-year contract dipped five ticks to 97.92.

REUTERS