NZ dollar gains on 40-year high terms of trade, upbeat Chinese manufacturing

The New Zealand dollar gain as local figures showed the country's terms of trade at a 40-year high in September and after better-than-expected Chinese manufacturing data provided some optimism for the trans-Tasman nations selling into the world's most populous country.

The kiwi rose to 81.94 US cents at 5pm in Wellington from 81.31 cents at 8am and 81.25 cents on Friday in New York. The trade-weighted index advanced to 76.93 from 76.41 last week.

New Zealand's terms of trade rose 7.5 percent in the September quarter, more than twice the forecast by local economists, on surging dairy prices in the quarter, even as volumes of exports shrank. The kiwi dollar nudged up after the terms of trade figures, and got a further lift when a second reading of Chinese manufacturing activity beat economists' expectations.

"The overseas trade figures and the Chinese manufacturing data gave a nice little shot in the arm" to the kiwi, said Michael Johnston, senior dealer at HiFX in Auckland. "There has been a lot of selling into rallies and I don't' think this is the start of an upward trend (in the kiwi), rather it's a short-term blip."

A BusinessDesk survey of nine strategists and traders predicts the kiwi may trade between 79.80 US cents and 83.50 cents this week. Seven predict the currency to advance while two say it might decline.

HiFX's Johnston said any strong US data this week should underpin gains in the US dollar, especially non-farm payrolls figures on Friday in Washington.

Investors will be watching the Reserve Bank of Australia when it reviews its key rate tomorrow, and is expected to keep the target cash rate unchanged at 2.5 percent. The kiwi gained to 89.56 Australian cents at 5pm in Wellington from 89.16 cents on Friday in New York.

The local currency gained to 83.87 yen at 5pm in Wellington from 83.21 yen last week, and advanced to 60.24 euro cents from 59.78 cents. It gained to 49.90 British pence from 49.63 pence on Friday in New York.

(BusinessDesk)