Dollar gains vs. AUD after weaker GDP, dairy prices rise

The New Zealand dollar gained against the Australian dollar after data showed slowing economic growth in Australia, while a pick-up in dairy prices soothed concerns about the local export outlook.

The kiwi rose to 90.46 Australian cents at 5pm in Wellington from 89.41 cents yesterday. It traded at 63.62 US cents from 63.31 cents at 8am, and little changed from 63.74 cents yesterday.

Australia's gross domestic product grew 0.2 percent in the three months ended June 30, according to the Bureau of Statistics. That was than half what economists were picking and the slowest quarterly expansion in two years, as falling commodity prices and tepid business investment held back production. A slowing Chinese economy is looming over Australia, which counts the world's most populous nation as its biggest export destination, and a weak Chinese manufacturing gauge yesterday stoked investors' concerns about Asia's biggest economy.

Meantime, New Zealand's currency got a boost from an 11 percent gain in dairy prices at the latest GlobalDairyTrade auction as Fonterra Cooperative Group scales back the volume of product it puts up for sale. Government data this week showed an unexpected rise in the country's terms of trade as a weaker kiwi stoked demand for local exports.

"There's all this risk aversion hanging out there that won't go away, and China is still not looking very good," said Imre Speizer, senior markets strategist at Westpac Banking Corp in Auckland. "Overnight the dairy auction was a positive for the kiwi, and global sentiment was quite weak again, which means the Aussie fell more than the kiwi."

The kiwi has support at 63.10/20 US cents, though Speizer said he expects that will break at some stage as stock markets and commodity prices continue to fall.

The local currency slipped to 4.0471 Chinese yuan at 5pm in Wellington from 4.0585 yuan yesterday, and declined to 76.43 yen from 76.97 yen. It decreased to 56.39 euro cents from 56.56 cents yesterday, and traded at 41.53 British pence from 41.40 pence. The trade-weighted index was little changed at 69.02 from 68.91.

New Zealand's two-year swap rate increased to 2.79 percent from 2.76 percent, and the 10-year swap rose to 3.59 percent from 3.55 percent.

(BusinessDesk)