Dollar stabilises after China bolsters yuan

The New Zealand and Australian currencies, which have shed 4.4% against the greenback so far this year, stabilised as China stepped in to bolster the yuan.

The kiwi rose to 65.40USc at 8am in Wellington, from 65.29USc at 5pm yesterday, while the Aussie held at 69.74USc from 69.72USc. The trade-weighted index gained to 72.08 from 71.94 yesterday.

The currencies of commodity producing countries such as New Zealand and Australia, which count China as their largest export market, have sunk this year amid concerns about weakness in Asia's largest economy.

Sentiment was bolstered overnight on reports the People's Bank of China had intervened in the currency.

China's central bank set the mid-point of the yuan's trading band against the US dollar higher for a second day and its chief economist said it plans to keep the yuan more tied to a basket of currencies rather than the US dollar.

"The AUD/USD spiked higher at the time of the fix yesterday afternoon, before a more enduring uptrend took hold in the evening," Bank of New Zealand senior market strategist fixed income, currencies and commodities Kymberly Martin says.

"The NZD/USD also followed along in the AUD's slipstream, assisted by the stabilisation in risk appetite overnight."

Ms Martin says the kiwi has support at its mid-November lows of 64.30USc and faces resistance toward the 100-day moving average near 65.90USc.

In New Zealand today, the ANZ Commodity Price Index is released at 1pm. Tomorrow, the focus will be on China's December trade data, which is expected to show further declines.

The New Zealand dollar advanced to 93.71Ac, from 93.59Ac yesterday, gained to 60.04euro c from 59.81euro c, edged up to 76.70 yen from 76.60 yen. It slipped to 4.2951 yuan from 4.2973 yuan yesterday and was little changed at 44.93 British pence from 44.94 pence.

(BusinessDesk)

Tina Morrison
Tue, 12 Jan 2016

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Dollar stabilises after China bolsters yuan