Kiwi slips lower on disappointing Chinese data

BUSINESSDESK: The New Zealand dollar drifted lower as investors worried about debt in Europe digested weak Chinese manufacturing reports and lower prices for locally-produced raw materials.

The kiwi slipped to 75.08 US cents at 5pm from 75.24 cents at 8am and 75.36 cents yesterday. The trade-weighted index declined to 68.91 from 69.06.

The decline came as the ANZ Commodity Price Index tumbled to a 21-month low in May. ANZ said the decline in the kiwi in May outpaced the fall in commodity prices.

Merchandise terms of trade data released today also showed a 2.3%decline in the terms of trade in the March 2012 quarter from the previous quarter. This means less imported goods could be funded by a fixed quantity of exported goods.

But dealers said the focus of the day was on two versions of manufacturing data in China.

“We had the HSBC measure and the official data. They were both weaker than consensus,” said Mike Hollows, director of trading at HiFX.

China’s Purchasing Managers’ Index fell to 50.4 in May from 53.3 in April. It was weaker than the 52 level expected by economists.

A separate gauge of manufacturing from HSBC Holdings Plc and Markit Economics showed a seventh straight contraction, the longest since the global financial crisis in 2009.

Mr Hollows said there was apprehension in the market ahead of non-farm payrolls data and investors remained worried about Europe.

The US non-farm payrolls report is expected to show the world's biggest economy added 150,000 jobs last month.

The lack of appetite for risk continues to weigh on the kiwi.

Markets are waiting on the June 17 election in Greece after the Mediterranean nation failed to elect a government last month. That has raised fears Greece will quit the eurozone as it struggles to balance its high level of indebtedness with an appropriate level of budget cuts.

The currency fell to a five-and-a-half month low 58.71 yen, and recently traded at 58.89 yen from 59.32 yen yesterday.

It was little changed at 77.56 Australian cents from 77.58 cents yesterday, and was at 60.81 euro cents from 60.82 cents. It rose to 48.85 pence from 48.65 pence yesterday.