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NZ dollar may gain as Chinese data, Fonterra forecast loom

The New Zealand may gain with more Chinese economic data coming later today and amid expectations Fonterra Cooperative Group will announce a hike in its forecast payout to farmers tomorrow.

The kiwi traded at 82.90 US cents at 5pm in Wellington from 82.70 cents at 8am and 82.91 cents yesterday. The trade-weighted index was 77.78 from 77.83 yesterday.

Traders are waiting on Chinese industrial production and retail figures to show more signs the world's second biggest economy is climbing out of a rut earlier this year, adding to optimism after a better-than-expected trade surplus was reported on the weekend. A strong print could support risk-sensitive assets such as the kiwi, and New Zealand's currency is likely to get a boost if Fonterra lifts its forecast payout to farmers after continued strength in global dairy prices.

If Fonterra raises its payout, "it wouldn't be a surprise - there's a 20 to 40 cent range for a lift in the price" forecast by analysts, said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. Strong Chinese data and a Fonterra hike "could help the kiwi."

New Zealand's Reserve Bank will review monetary policy on Thursday and is expected to keep the key rate at 2.5 percent, though it might have to tweak its forward guidance on the path for rate hikes due to the strength of the currency.

CBA's Tennent-Brown said a slower or less aggressive tightening policy could take the steam out of the kiwi/Australian cross-rate, which has been at five-year highs due to the divergent economic fortunes of the neighbouring nations. The kiwi rose to 91.04 Australian cents from 90.81 cents yesterday.

The local economy got another boost from figures showing better than expected consumer spending on credit and debit cards last month. Seasonally adjusted retail spending on electronic cards rose 0.6 percent in November to $4.53 billion, ahead of the 0.4 percent pace predicted in a Reuters survey of economists.

The New Zealand dollar could find more support before the Christmas trading season begins, with the government's half-year economic and fiscal update next Tuesday, and third-quarter gross domestic product and balance of payments also down for next week.

The kiwi slipped to 50.38 British pence at 5pm in Wellington from 50.74 pence yesterday, and declined to 60.26 euro cents from 60.50 cents. It climbed to 85.63 yen from 85.32 yen yesterday.

(BusinessDesk)

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