Friday, the kiwi dollar edged higher against other majors despite a report showed that New Zealand's economy contracted at the fastest pace in 16 years in the fourth quarter of 2008. The New Zealand dollar jumped to a new multi-month high against the Japanese yen and surged up to near yesterday's 2-1/2 month high against the US dollar and the euro.

New Zealand's recession deepened in the final three months of 2008. Statistics NZ reported today that the nation's Gross Domestic Product (GDP) for the fourth quarter contracted 0.9 percent compared to the third quarter. Compared to Q4 of one year earlier, GDP shrank 1.9 percent. For the full year to the December quarter, GDP was up 0.2 percent.

In a separate report, Statistics NZ reported today that merchandise exports declined in overall value by 6.6 percent or NZ$243 million compared to the month before. It was the first decline in exports in six months. The value of merchandise imports declined 14.2 percent or NZ$490 million, the largest drop in 16 years. The monthly trade balance for February was NZ$489 million, equivalent to 14.2 percent of exports, the highest percentage for a February month since 2001.

The New Zealand dollar was supported by a strong equity markets.

New Zealand stock market opened stronger today following a positive overnight lead from the Wall Street where U.S. stocks closed higher on some reassuring economic news. The benchmark NZX 50 index was up 14.55 points or 0.56% to 2,630.81 shortly after the market opened for the day, while the broader NZX All Capital Index added 12.08 points or 0.46% to 2,664.68.

The New Zealand dollar rose to 57.19 against the yen by 6:50 pm Eastern Time, the highest level since November 11, 2008. On the upside, the NZ dollar may likely target the 59.6 level. The kiwi-yen pair is presently worth at 56.61, compared to Thursday's New York session closing value of 56.87.

The yen showed some strength across the board after a government report showed today that consumer prices in Japan posted little or no change for the year to February. The report showed that core consumer price index was unchanged in February from one year earlier, while the overall CPI was down 0.1 percent on year. The data showed overall inflation was down 0.3 percent compared to one month earlier.

Core consumer prices in the Tokyo metropolitan region was up 0.4 percent in March following a 0.6 percent increase in February. Tokyo's overall CPI was up 0.3 percent on year. Tokyo data is considered a leading indicator of the nationwide trends.

However, retail sales in Japan plummeted by 5.8 percent in February when compared to a year earlier, according to government data released today. The decline was the sharpest in 7 years and the 5th straight month of lower retail sales. The decline is partly attributable to the leap year adding an extra business day to last year's calendar. Sales by large-scale retailers were down 8.2 percent following an upwardly revised decline of 5.5 percent in January.

After an initial weakness, the New Zealand dollar edged higher to 2.3407 against the euro by 6:55 pm ET, just a few pips away from yesterday's multi-month high. The kiwi, however, pared some gains shortly and is presently quoted at 2.3544 against the euro. The euro-kiwi pair closed Thursday's North American deals at 2.3514.

Traders are now looking forward to Germany's preliminary inflation report for March, France's final gross domestic product report for the fourth quarter and the euro-zone industrial new orders for January in the upcoming session.

Halting an initial downtrend at 5:40 pm Eastern Time, the New Zealand dollar advanced to 1.2125 against the Australian dollar by 10:45 pm Eastern Time. The aussie-kiwi pair is presently trading at 1.2147, compared to Thursday's close of 1.22.

Against the US dollar, the New Zealand currency drifted higher to 0.5795 by 9:10 PM Eastern Time and thus moved closer to yesterday's multi-month high. The kiwi-buck pair, which closed Thursday's New York trading at 0.5759, is currently quoted at 0.578.

Traders pondered over the US Commerce Department's final report on fourth quarter gross domestic product released yesterday showing that the GDP fell by a revised 6.3 percent in the fourth quarter compared to the preliminary estimate of a 6.2 percent decrease. Economists had been expecting GDP to be revised to show a somewhat steeper 6.6 percent contraction.

At the same time, the U.S. Labor Department announced that initial jobless claims rose to 652,000 for the week ended March 20th, compared to the previous week's level of 644,000. Also, people continuing to collect unemployment rose to 5.560 million in the most recent data, compared to the previous mark of 5.438 million.

In the New York session today, the US personal consumption expenditure report is due out at 8:30 am Eastern Time. Analysts expect the headline figure to rise modestly to 0.8 percent from 0.7 percent increase in January.

Additionally, the final reading of the University of Michigan's consumer sentiment index for March is due to be released at 10 AM ET. The report is expected to show that the consumer sentiment index rose to 56.8 from February's 56.6.

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