Dollar falls as commodity prices sink on concerns about China

The New Zealand dollar fell as commodity prices sank on concern about weaker demand from China.

The kiwi declined to 65.36USc at 8am in Wellington, from 65.60USc at 5pm yesterday. The trade-weighted index dropped to 72.11 from 72.27 yesterday.

The CRB Index, which measures a basket of 19 global commodities, hit a fresh 14-year low overnight, sliding 1.3% to take its decline so far this year to 8%.

Oil prices fell on expectations of higher US stockpiles, industrial metal prices remained under pressure and gold declined.

Commodity prices have weakened amid concern about a slowdown in the Chinese economy where officials are trying to stabilise volatile financial markets. That's affecting commodity-linked currencies such as the kiwi.

"The downbeat feel to the start of the year continued," ANZ Bank New Zealand agri economist Con Williams and markets economist Daniel Wilson say.

"With commodities printing fresh lows, China intervening in the market, and any bounce in US equities lacking conviction, risks remain to the downside for the New Zealand dollar."

ANZ Bank expects the kiwi to trade between 64.90USc and 65.80USc today.

In New Zealand today, state-owned valuer Quotable Value is scheduled to release its December monthly housing data, and its 2015 Year in Review at midday.

This afternoon, all eyes will be on the publication of China's December trade data, which is expected to a show a continued decline in imports and exports. China is New Zealand's biggest trading partner.

The New Zealand dollar advanced to 45.33 British pence from 45.15 British pence yesterday after weaker than expected UK data. British industrial output dropped 0.7% in November, below economists' forecasts for an unchanged reading, and the sharpest fall since early 2013.

UK manufacturing data also disappointed, showing a 0.4% drop for the second month running, prompting analysts to lower growth forecasts for the fourth quarter of last year, Reuters says.

The kiwi fell to 93.53Ac from 93.88Ac yesterday, slipped to 76.80 yen from 77.08 yen, and declined to 4.2942 yuan from 4.3129 yuan. It was little changed at 60.23 euro c from 60.28 euro c yesterday.

(BusinessDesk)