SYDNEY/WELLINGTON (Reuters) - The Australian dollar slipped on Friday after disappointing retail sales data cemented views that interest rates will stay at record lows for a long time yet, while its New Zealand cousin hovered near a seven-day top.
Retail sales were flat in September, data from the Australian Bureau of Statistics (ABS) showed, a big surprise given analysts had looked for a bounce of 0.4 percent following a shock decline in August.
Annual retail growth is now crawling at 1.4 percent, levels last seen during the global financial crisis.
The Australian dollar <AUD=D4> skidded about a quarter of a cent following the data to be down 0.4 percent at $0.7683, leaving behind a more than one-week high of $0.7729 set on Thursday.
For the week, the Aussie has so far managed to eke out a small 0.1 percent gain after two straight falls.
"The overall story in the broad retail sector is still one of slow growth, as both volumes of spending growth is low and retailing pricing power is weak," said Diana Mousina, senior economist at AMP Capital.
"With the outlook for the consumer this uncertain we remain comfortable with our view that rate hikes are unlikely to occur until the very end of 2018."
Friday's data showed Australian retailers tried discounting their wares to entice shoppers, but overall sales volumes still only edged higher.
The deflationary pulse led investors to further push forward the likely timing of an interest rate hike. Rates futures now are not fully priced for a 25-basis-points increase until early 2019. <0#YIB:>
Across the Tasman Sea, the New Zealand dollar <NZD=D4> edged up 0.25 percent to $0.6926, but stayed below a seven-day high of $0.6944 touched the previous session.
For the week, the kiwi is poised to gain 0.8 percent.
Investors had battered the kiwi dollar recently on concerns over the new Labour government's left-leaning policies, including a clampdown on foreign investment and migration.
But stronger-than-expected jobs data this week buoyed sentiment.
"As the political dust has settled we are not particularly surprised to see the NZD almost a cent off last week's lows," said Sharon Zollner, senior economist at ANZ Bank.
"But whether it pushes up towards 70 cents is likely to hinge on USD developments."
Earlier this week, data showed New Zealand's jobless rate hit a nine-year low last quarter as employment surged past all expectations, fuelling hopes for a revival in wage growth.
New Zealand government bonds <0#NZTSY=> gained, sending yields 7.5 basis points lower at the long end of the curve.
Australian government bond futures jumped, with the three-year bond contract <YTTc1> up 6 ticks at 98.060. The 10-year contract <YTCc1> climbed 7.5 ticks to 97.40.
(Editing by Jacqueline Wong)
