NZ dollar holds near two-month low on weak Chinese, European manufacturing

The New Zealand dollar held near a two-month low against the greenback after figures showed weak manufacturing sectors in China and the Euro-zone, eroding demand for commodity-linked assets.

The kiwi was unchanged at 80.81 US cents at 8am, having touched 80.66 cents yesterday, the lowest the currency has fallen since Jan. 26.

HSBC’s flash manufacturing PMI for China, New Zealand’s second-biggest export partner, showed the world’s second-biggest economy may be in for its fifth monthly contraction. Trans-Tasman currencies dropped sharply after the PMI, which came just two days after BHP Billiton, the world’s biggest miner, warned of flatter Chinese demand for iron ore.

“It clearly caused the direction of the New Zealand and Australian dollars to move lower,” said Alex Sinton, senior dealer at ANZ New Zealand. “I don’t think it will remain all together negative for ourselves. Today we will probably see support at 80.50 US cents.”

Euro-area services and manufacturing output contracted more than economists forecast, adding to signs the region has slipped into recession. Eurozone Composite PMI fell to 48.7 in March from 49.3 in February, that’s below the 50 point mark that separates expansion from contraction.

That dimmed investors’ appetite for higher-yielding assets, with stocks on Wall Street and in Europe falling in the Northern Hemisphere session. The Standard & Poor’s 500 Index fell 0.9 percent to 1390.86, and Germany’s DAX dropped 1.3 percent to 6981.26.

US data continued to improve, with the world’s biggest economy showing an unexpected decline in people claiming unemployment benefits. Initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 348,000 last week, the lowest level since February 2008, according to the Labor Department. Economists polled by Reuters had forecast claims rising to 354,000.

“The data would probably be more of support than a driver of a higher New Zealand dollar,” Sinton said.

The New Zealand dollar rose to 77.83 Australian cents from 77.76 cents yesterday. The kiwi gained to 62.21 euro cents from 61.07 cents and advanced to 51.02 British pence from 50.92 pence.

It dropped to 66.57 yen from 67.22 yen. The trade-weighted index was little-changed on 72.13 from 72.18.