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NZ dollar heading to a weekly 0.8% decline, eyes on US

15 July 2017

U.S. Treasurys saw early buying Friday, driving yields firmly lower, as a weak report on retail sales and inflation raised fresh questions about the pace of the Federal Reserve's plans to normalize monetary policy by lifting rates and shrinking its asset portfolio.

The US dollar index against a basket of major currencies lost 0.08 percent to 95.69 and is set to end the week 0.25 percent lower.

The continued drop in sales surprised economists, who had expected sales to inch up by 0.1% compared to the 0.3% decrease originally reported for the previous month.

Moreover, retail sales growth for June was -0.2%, another disappointing economic data point that is driving market activity. Ex-auto sales were expected to rise by 0.2%.

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Year-over-year, consumer prices increased 1.6% last month, below forecasts for a 1.7% increase and easing even further from the 1.9% advance seen in May. The core CPI, which excludes food and energy prices, fell to 1.7 percent from 2.2 percent over the same period and is forecast to hold steady.

TOKYO, July 14 (Reuters) - The dollar was little changed against a group of peers early on Friday, as currency investors remained cautious ahead of USA inflation data due later in the session, which is expected to set the greenback's near-term direction.

USA retail sales unexpectedly decreased for the second consecutive month in June. A second report from the Commerce Department showed retail sales fell 0.2 per cent last month, weighed down by declines in receipts at service stations, clothing stores and supermarkets. Inventories are expected to rise by 0.2%.

Fed Chair Janet Yellen was the talk of the town after catching investors unaware by adopting a dovish stance in her testimony before Congress.

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Inflation probably wouldn't have to accelerate by much to set the stage for the Fed to fit in another rate increase this year, said Michelle Meyer, head of U.S. economics at Bank of America Merrill Lynch. "We expect a little more cautious language from Fed officials on the inflation outlook going forward", said Michael Hanson, chief economist at TD Securities in NY.

Dallas Fed president Robert Kaplan also sounded a note of caution Thursday. Against the yen, the greenback rose. WTI crude traded 0.67% higher on Friday morning at $46.40/bbl, after falling as low as $42.50/bbl just three weeks ago.

The greenback edged down 0.2 percent to 1134.30 against Korean won.

The New Zealand dollar was trading at 73.16 United States cents as at 5 pm from 72.84 cents late yesterday but was weaker versus last Friday in NY when it traded at 73.80.

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NZ dollar heading to a weekly 0.8% decline, eyes on US