Forex - NZD/USD drops on weak inflation data

[Ramon Ramirez]

Forexpros - The New Zealand dollar fell against its U.S. counterpart on Tuesday after inflation rates came in weaker than expected in the South Pacific country.

NZD/USD hit 0.7971 in Asian trading on Tuesday, down 0.10%, up from a session low of 0.7963 and off from a high of 0.7976.

The pair sought to test support at 0.7937, the low of July 16, and resistance at 0.7988, the high of July 16.

Statistics New Zealand reported earlier that the country's consumer price index rose to a seasonally adjusted 0.3% in the second quarter of this year, down from 0.5% in the preceding quarter.

Analysts had expected the inflation rate to rise 0.5% in the quarter.

The quarterly inflation rate was the lowest in 12 years.

The news spared talked the Reserve Bank of New Zealand will grow increasingly likely to keep interest rates low, which was bearish for the country's currency.

Weak retail sales in the U.S. capped the U.S. dollar's gains against its New Zealand cousin.

The Commerce Department reported U.S. retail sales dropped by a seasonally adjusted 0.5% in June, far worse than market calls for a 0.2% gain.

The softer-than-expected numbers came in wake of a 0.2% decline in May and marked the first time retail sales had dropped in three consecutive months since late 2008.

Core retail sales, which are stripped of automobile sales, contracted for a second consecutive month, dropping 0.4%, defying market expectations for a gain of 0.1%, after falling by 0.4% in May.

The New Zealand dollar, meanwhile, was down against the yen and down against its Australian counterpart, with NZD/JPY losing 0.09% to 62.87 and AUD/NZD up 0.17% at 1.2867.

Federal Reserve Chairman Ben Bernanke is due to speak before Congress later Tuesday, which will serve as the pair's chief steering current later in the day.

[cct]

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