Dollar holds above 99AUc on weak consumer confidence, China GDP

The New Zealand dollar held above 99 Australian cents, putting it back within reach of parity, after a decline in Australian consumer confidence and the weakest Chinese growth in six years weighed on the Aussie dollar.

The kiwi traded at 99.04 Australian cents at 5pm in Wellington, from 98.51 cents immediately before China released economic activity indicators for March, and from 98.24 cents late yesterday. The local dollar rose to 75.20 US cents from 74.61 cents yesterday.

The Melbourne Institute and Westpac Bank index of Australian consumer sentiment fell 3.2 percent, seasonally adjusted, in April, following a 1.2 percent drop in March, underlining expectations the Reserve Bank of Australia will cut its cash rate to 2 percent next month and may contemplate further cuts, widening the gap with New Zealand rates. Chinese first-quarter economic growth slowed to 7 percent, the weakest since 2009 although in line with forecasts, while March data for factory output, fixed-asset investment and retail sales missed estimates.

"We're still seeing that belief that the path of interest rate differentials is going to favour being longer kiwi at the moment," said Chris Weston, chief market strategist at IG Markets. The swaps market is showing about a 75 percent chance of a rate cut in May "and the bigger question then is what's going to drive the RBA below 2 percent."

The New Zealand dollar touched 99.78 Australian cents last week, its highest level since being allowed to trade freely in 1984.

Chinese data for March released today showed factory output climbed 5.6 percent from the same month a year ago, lagging forecasts in a Reuters poll for a 6.9 percent gain and signalling weaker demand for Australian hard commodity exports. Chinese retail sales, now watched more closely as China becomes more of a consumer society, expanded 10.2 percent, missing expectations for a 10.9 percent gain. Meanwhile fixed-asset investment advanced 13.5 percent, lagging behind the 13.8 percent forecast.

Tonight, in the US, traders will be eyeing the Fed Beige Book for a gauge of economic conditions and the New York Empire survey of manufacturing. Early tomorrow morning, traders will be eyeing the latest GlobalDairyTrade auction, with NZX dairy futures suggesting prices will decline. Dairy products are New Zealand's largest commodity export.

The New Zealand dollar advanced to 89.97 yen from 89.49 yen yesterday. The kiwi traded at 70.76 euro cents from 70.69 euro yesterday. The local currency was little changed at 50.97 British pence from 50.90 pence yesterday. The trade-weighted index advanced to 79.20 from 78.69 yesterday.

(BusinessDesk)