The New Zealand dollar rose after China's official performance of manufacturing index beat expectations, rising to a one-year high in March and boosting demand for commodity currencies such as the kiwi.
BUSINESSDESK: The New Zealand dollar rose after China’s official performance of manufacturing index beat expectations, rising to a one-year high in March and boosting demand for commodity currencies such as the kiwi.
The New Zealand dollar traded at 82.26 US cents just before 8am, up from 81.82 cents at the close of trading in New York on Friday. The trade weighted index increased to 73.2 from 72.81.
China, New Zealand’s second-biggest export market, reported its manufacturing gauge rose to 53.1 from 51.0 in February, reducing speculation the People’s Bank of China will ease monetary policy in the coming days.
In contrast, the HSBC’s flash manufacturing, the unofficial reading of China’s PMI, last month showed the world’s second-biggest economy was headed for its fifth monthly contraction.
“That will be the initial reason why the New Zealand dollar is up so high,” said Stuart Ive, currency strategist at HiFX.
“The official government figures differed hugely from the HCBC ones - the level headed minds in the market will be looking at the HSBC figures.”
Australia, New Zealand’s largest export market, is under pressure to easy its monetary policy as its economic growth continues to wane.
The Reserve Bank of Australia will meet tomorrow to decide whether or not to cut rates, which remained unchanged on 4.25% from its March meeting.
The RBA is expected to slash interest rates by 75 basis points over the next 12 months, according to the Overnight Index Swap curve, narrowing the gap with New Zealand’s record low official cash rate of 2.5%.
New Zealand’s central bank is seen lifting the OCR by 25 basis points in the next 12 months.
Mr Ive said the New Zealand dollar is likely to trade within a range of 78.10 Australian cents to 80 cents this week.
Whether the kiwi will finish the week higher or lower is “completely down to the RBA – if the RBA cuts rates then yes, we will”.
In New Zealand, there is no significant data set for release today.
The New Zealand dollar fell to 78.74 Australian cents from 79.07 cents at the close of trading in New York.
It rose to 61.61 euro cents from 61.31 cents and gained to 51.39 British pence from 51.09 pence. The kiwi increased to 68.36 yen from 67.74 yen.
