Kiwi near AUD three-year high as China becomes top trading partner

The kiwi held near a three-year high against the Australian dollar after figures showed China has become the country's biggest trading partner, beating the NZD's Anzac cousin.

The NZ dollar traded at 82.70 Australian cents at 5pm in Wellington from 82.65 cents yesterday, having climbed as high as 82.85 cents. The local currency rose to 85.30 US cents at 5pm from 84.77 cents at 8am, from 85.23 cents in Asia yesterday.

Exports to China jumped 32 percent to $2.3 billion and imports rose 2.8 percent to $1.8 billion, outpacing trade with nearest neighbour Australia, which took $2.2 billion of New Zealand's exports, down 7.3 percent, and sent $1.5 billion of its produce across the Tasman (down 5.3 percent), according to Statistics New Zealand.

New Zealand's growing reliance on Chinese trade has coincided with a parting of ways in the economic fortunes with Australia, as the local central bank looks poised to hike rates as its next move, while the market is pricing in cuts to Australia's benchmark rate.

"The trade figures were quite good and might get a little more attention than usual due to the fact that China has overtaken Australia as the No 1 export destination for New Zealand," says Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney.

"The interest rate differential is the key driver" for the kiwi's gain against Australia's currency, he says.

The kiwi fell to 84.23 yen at 5pm in from 84.64 yen yesterday after the Bank of Japan affirmed its annual increase to the monetary base by about 60 trillion to 70 trillion yen.

Japan's central bank has embarked on a massive monetary stimulus in a bid to end its long-running deflation and seeks to lift the annual pace of consumer price increases to 2 percent within two years.

The local currency is poised for a 1.3 percent weekly gain against the greenback in a week where investors regained some of their dwindling confidence as US corporate earnings beat expectations.

A BusinessDesk survey of strategists picking a trading range of between 83.30 US cents to 85 cents, with the risks skewed to the downside.

Investors will be looking at US first quarter gross domestic product estimates on Friday Washington time, which are expected to show an annual pace of growth of 3 percent.

The kiwi increased to 65.43 euro cents from 65.37 cents yesterday and dropped to 55.184 British pence from 55.68 pence following the stronger-than-expected GDP figures.

The trade-weighted index was little changed at 78.75 from 78.92 yesterday and is heading for a 0.9 percent weekly gain.

(BusinessDesk)