NZ dollar gains versus yen, greenback as China marks modest return from holiday

The New Zealand dollar gained against the yen and the greenback as China's markets reopened after the Chinese New Year holiday without a big selloff in stocks that some had feared.

The kiwi rose to 75.79 yen at 5pm in Wellington from 74.98 yen at the start of the day and from 75.50 yen on Friday. The local currency rose to 66.53 US cents, having dipped as low as 66.18 this morning and from 66.29 cents in New York at the end of last week.

The Shanghai SE Composite Index was down about 1.6 percent at around noon in Shanghai, soothing fears of a major sell-off as Chinese stock prices played catchup to the rest of the world. Japan's Nikkei 225 Index fell more than 10 percent last week. Meanwhile, the People's Bank of China fixed the yuan at the highest rate in more than a month, helping alleviate fears of a devaluation. China is New Zealand's biggest export market after Australia.

"China's come back with all guns blazing," said Tim Kelleher, head of institutional sales at ASB Bank. "We've seen a little bit of risk on. People were worried because the indicators this morning were pointing to a drop greater than 6 percent this morning" for Chinese stocks.

The New Zealand dollar fell to 4.3257 from 4.3921 yuan on Friday. Chinese central bank governor Zhou Xiaochuan said that there was no basis for continued yuan depreciation given that the nation's balance of payments are good, capital outflows are normal and the exchange rate is basically stable against a basket of currencies, according to an interview in Chinese financial magazine Caixin published at the weekend.

Kelleher said New Zealand merger and acquisition activity today also helped sentiment. Allnex Belgium SA has proposed buying Nuplex Industries via a scheme of arrangement, to create one of the world's largest makers of coating resins. Diligent Corp said today that buyout firm Insight Venture Partners will acquire the governance software developer for $941 million.

The New Zealand dollar fell to 92.95 Australian cents from 93.76 cents on Friday, rose to 59.33 euro cents from 59.16 cents, and declined to 45.78 British pence from 46.19 pence. The trade-weighted index fell to 72.12 from 72.56.

The two-year swap rate was unchanged at 2.56 percent and 10-year swaps rose about 2 basis points to 3.17 percent.

(BusinessDesk)