Kiwi gains as Chinese data improves, threats remain

The New Zealand dollar gained in the local trading session as Chinese data showed the world's second-biggest economy was rebalancing towards domestic consumption, soothing fears of a sharp slowdown.

The kiwi rose to 81.58 US cents at 5pm in Wellington from 81.39 cents at 8am and 81.45 cents on Friday in New York. The trade-weighted index advanced to 73.06 from 72.94 last week.

Chinese industrial product gained 9.6% last month from a year earlier and retail sales rallied 15%, stoking optimism the world's most populous nation will not slow down as fast as earlier feared and drag down the global economic recovery.

Still, investors are concerned about the US ability to bridge a gap between opposing political parties and avoid the "fiscal cliff" of $US600 billion in tax hikes and federal spending cuts.

"Chinese demand is becoming more refocused on domestic consumption – the retail sales pick up shows more sustainable Chinese growth," says Imre Speizer, market strategist at Westpac Banking Corp in Auckland.

"The fiscal cliff is the biggie to watch this week" and the kiwi may "drift lower down to 80.60 US cents" as investors remain nervous about the global situation, he says.

Five of six traders and strategists in a BusinessDesk survey say the kiwi may weaken this week after last week's household labour force survey showed unemployment at a 13-year high, lending greater weight to third-quarter data, including retail sales on Wednesday.

The kiwi traded at 64.83 yen from 64.71 yen last week after government figures showed Japan's economy shrank 0.9% in the September quarter and is at risk of tipping in recession with a contraction forecast for the December period.

New Zealand's currency edged up to 64.12 euro cents from 64.06 cents on Friday in New York after Greek legislators agreed to deep budget cuts in a bid to secure its bailout package.

European finance chiefs will meet today in Brussels to discuss the rescue funding.

The kiwi was little changed at 78.31 Australian cents from 78.38 cents last week and edged up to 51.31 British pence from 51.23 pence.