Kiwi rises, Chinese manufacturing slows and ECB, Fed loom

BUSINESSDESK: The New Zealand dollar rose above 81 US cents in local trading as official Chinese figures showed manufacturing in the world's second-biggest economy is still growing, albeit at a slower pace, and ahead of the European and US central bank meetings.

The kiwi hit 81.07 US cents at 5pm from 80.83 cent at 8am, little changed from 80.99 cents yesterday. The trade weighted index inched up to 73 from 72.93.

Official Chinese manufacturing figures were less upbeat than expected, though still showed the sector is growing.

The Purchasing Managers’ Index slipped to 50.1 in July from 50.2 in June on a scale where anything above 50 still means expansion. A reading of 50.5 was expected, according to a Bloomberg survey.

That comes ahead of the Federal Reserve's monetary policy statement tomorrow in Washington and the European Central Bank's review the same day in Frankfurt.

Traders are watching for tougher rhetoric from the Fed, while the ECB is expected to embark on a new round of stimulus after president Mario Draghi said he will do anything to save the region's single currency.

"The Chinese data was mixed," said Tim Kelleher, head of institutional FX sales NZ, ASB Institutional. "We're waiting for the fed tomorrow morning and the ECB tomorrow night. If the fed does nothing we'll probably see it [the kiwi] come back pretty quickly to 80 cents."

The range for the kiwi ahead of the FOMC is 80.75 US cents to 81.30 cents, he said. Comments this week that the kiwi has become a safe haven are also underpinning the local currency.

The kiwi rose to a two-week high against the Australian dollar, which may reflect Australian media reports that Rio Tinto is closing offices and shedding workers because of falling commodity prices. That could be undermining the Australian dollar, Mr Kelleher said.

The kiwi rose as high as 77.32 Australian cents and traded at 77.27 cents at 5pm from 76.92 cents yesterday.

Markets will keep an eye on price action at Fonterra's online auction on Wednesday in the US. Prices have been falling in recent months, and traders will be looking to see whether they have plateaued yet.

The kiwi was little changed at 65.92 euro cents from 65.96 cents yesterday and advanced to 51.73 pence from 51.52 pence. It decreased to 63.24 yen from 63.35 yen.