The New Zealand dollar touched a two-month high overnight, approaching 87.50 US cents, after a measure of Chinese manufacturing was stronger than expected, boosting sentiment about Asia's largest economy.
The kiwi touched 87.48 US cents overnight, its highest level since May 6 when it reached 87.79 cents, the highest in more than two-and-a-half years. The local currency was trading at 87.12 US cents at 8am in Wellington, from 87.32 cents at 5pm yesterday. The trade-weighted index slipped to 81.01 from 81.16 yesterday.
HSBC's monthly survey of purchasing managers released yesterday signalled the first expansion in six months in China's manufacturing sector. The index rose to 50.8 in a scale where a reading above 50 indicates expansion, exceeding forecasts for 49.7 and ahead of 49.4 last month. China is New Zealand's biggest trading partner, and kiwi businesses exported $11.4 billion of goods in the year through April.
"The kiwi rose to a fresh two-month high mainly because of the strong China manufacturing PMI result yesterday," said Imre Speizer, senior market strategist at Westpac Banking Corp. "We and Australia have close trade ties to China. A stronger economy there means they buy more of our dairy products etc."
The New Zealand dollar slipped later in the evening after European Central Bank president Mario Draghi told Dutch newspaper Telegraaf that stimulus would continue until at least the end of 2016, implying no interest rate rises before then. The resulting decline in European bond yields affected yields in other markets and weakened the kiwi, Speizer said.
"Despite the fall during the evening, I think the early push higher yesterday will resonate more strongly," said Speizer. He expects the kiwi to creep back up towards 87.50 US cents today, with the potential to break through that level in coming days.
Reserve Bank deputy governor Geoff Bascand spoke to the New Zealand Institute of Chartered Accountants' workshop in Wellington this morning about risk management.
Tonight, the US has reports on house prices, consumer confidence, Richmond manufacturing and new home sales.
The New Zealand dollar was little changed at 92.47 Australian cents from 92.50 cents yesterday.
The kiwi weakened to 64.02 euro cents from 64.17 cents yesterday, edged lower to 51.14 British pence from 51.24 pence and slid to 88.73 yen from 89.01 yen.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Marlborough-based wine company lists on the NXT despite OIO hiccup
- New lawyers not doing 'much better' than job at McDonald's – report surprises
- Sky TV-Vodafone merger application highlights threats – including those to key sports content
- Business confidence perks up in June as construction, tourism underpin economy
- Fletcher drops Horokiwi Quarries from Higgins purchase as application delayed again
Most listened to
- Marlborough Wine Estates CEO Catherine Ma explains why the Chinese-owned company listed on the NXT
- National list MP Chris Bishop says Phil Twyford's accusation the government has made housing a 'race issue' is hypocritical
- NBR technology editor Chris Keall on hitting 4000 member subscribers
- In his Editor's Insight Nevil Gibson on the future of health information technology and medical devices industry
- Transferring client funds to buy a car and not declaring conflicts of interest; NBR's Hamish McNicol on the accounting indiscretion