Kiwi gains against euro after weaker German PMI

The New Zealand dollar rose against the euro after German manufacturing and eurozone services weakened and edged up against the greenback ahead of the reserve Bank's interest rate review.

The kiwi rose to 64.61 euro cents from 64.33 cents at 5pm in Wellington yesterday. It gained to 84.04 US cents from 83.94 cents.

A survey of purchasing managers in the services and manufacturing industries in the eurozone was at 46.5 this month, signalling contraction, while Germany's PMI fell to 47.9 from 49 on a scale where 50 marks the line between contraction and expansion.

At home, Reserve Bank governor Graeme Wheeler is expected to keep the official cash rate unchanged at 2.5 percent this morning, while making reference to the strong kiwi and the heat in the housing market.

"It would not be a surprise to see the 'strong' NZD to be given some ink in the statement," says Kymberly Martin, market strategist at Bank of New Zealand.

"The market prices the RBNZ being 'on hold' well into next year. The market would therefore need to start pricing rate cuts if yields are to fall from current levels, and thereby undermine the NZD's interest rate differential support."

Traders are also awaiting the release today of first-quarter inflation data in Australia, which will provide clues to the prospects for interest rates across the Tasman.

The consumer price index rose 0.7 percent in the first three months of the year from 0.2 percent in the fourth quarter of 2012, for an annual pace of 2.8 percent.

The kiwi fell to 81.84 Australian cents from 81.97 cents and climbed to 83.53 yen from 82.87 yen. It rose to 55.12 British pence from 54.96 pence.

The trade-weighted index rose to 77.84 from 77.65.

(BusinessDesk)

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Kiwi gains against euro after weaker German PMI