WELLINGTON: The Australian dollar was pulled closer to this year's trough on Wednesday following a surprisingly weak retail sales figure, dragging the New Zealand dollar lower in the process.
The Aussie dropped 0.8 percent on the day to $0.8670 after retail sales rose a meager 0.1 percent in August, missing forecasts of 0.4 percent.
"U.S dollar strength was the dominant theme and the weak retail sales data didn't help," said Su-Lin Ong, senior economist at RBC Capital Markets.
It even fell against a wounded euro which had slipped overnight amid disappointing economic data in the euro zone.
The common currency leapt nearly a full cent to A$1.4537, pulling closer to a three-month peak of A$1.4588 touched Tuesday.
The Aussie was closing in on the 2014 low of $0.8660, a level of key support, and a breach would take it to its weakest in more than four years.
"It may take a bit of work to break it, but it seems inevitable," Ong added, seeing the next major level at $0.8320.
The Aussie has tumbled more than 6 percent in the past month amid a strengthening US dollar and sliding commodity prices.
Other data showed a marginal rise of 0.1 percent in Australian home prices in September following three months of strong gains.
The slowdown should actually be welcomed by the Reserve Bank of Australia which recently has become concerned that a surge in borrowing to buy investment properties could lift prices to unsustainable levels.
Renewed pressure on the Aussie weighed on its New Zealand neighbour, which dropped 0.6 percent on the day versus the greenback. It was last at $0.7766, not far from a 14-month low of $0.7708 touched Monday.
The next major test will come from the fortnightly dairy auction later on Wednesday.
Some hope global prices may be finding a bottom after their precipitous slide of around 45 percent since their peak in February.
"A weak figure here could see the NZ dollar dip back to its $0.7700 support, while an increase in dairy prices could see the kiwi looking toward $0.80," said ASB economist Christina Leung in a note.
The kiwi, which dropped 6.5 percent in September, finds strong support from a cluster of daily lows made in mid-2013 between $0.7670/80. New Zealand government bonds were firmer, with yields off 1.5 to 2.5 basis points. Australian government bond futures also edged up, with the three-year bond contract gaining 3 ticks to 97.290.
The 10-year contract added 2 ticks to 96.505.
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