NZ dollar little changed as Chinese industrial production slows; US manufacturing data looms
By Paul McBeth
Aug. 3 (BusinessDesk) - The New Zealand dollar was little changed as Chinese data showed industrial production slowed more than expected last month, raising fears about the strength of the world's most-populous nation, and as traders await US manufacturing data.
The kiwi traded at 65.82 US cents at 5pm in Wellington from 65.88 cents at 8am and unchanged from the New York close on Friday. The trade-weighted index edged up to 70.24 from 70.14.
The Caixin purchasing managers' index showed China's factory activity shrank more than earlier estimated last month, and stoking concerns about the world's second biggest economy. While that would normally weigh on currencies such as the kiwi dollar, whose economies are tied to the fortunes of China, weak US employment cost data on Friday has put the world's biggest economy in focus, with the ISM manufacturing index the next gauge traders are watching ahead of US non-farm payrolls at the end of the week.
"I was pretty surprised we didn't see more reaction to the miss in the Chinese PMI," said Raiko Shareef, currency strategist at Bank of New Zealand in Wellington. "The kiwi tried to test the 65 (US cents) level on Friday night, but the employment index in the States put paid to that - we'll probably have another test of that this week."
BNZ's Shareef said the main focus for the kiwi dollar this week will be US non-farm payrolls on Friday in Washington, the next GlobalDairyTrade auction on Tuesday in the US, and the Fonterra Cooperative Group's milk price forecast on Friday.
"A lot of the bad news has already been priced in," so it will take a drop in the milk price of at least 5 percent, or a forecast farmgate payout below $4 per kilogram of milk solids to spark a fall in the kiwi, he said.
A BusinessDesk survey of 10 currency analysts predicts the kiwi will trade between 64.50 US cents and 67.50 cents this week. Six expect a decline while four say it may remain largely unchanged.
The kiwi traded at 90.20 Australian cents at 5pm in Wellington from 90.07 cents on Friday in New York ahead of tomorrow's policy review by the Reserve Bank of Australia. The RBA is expected to keep the target cash rate at 2.5 percent.
The local currency was little changed at 4.0859 Chinese yuan from 4.0872 yuan last week, and 81.62 yen from 81.56 yen. It traded at 59.94 euro cents from 59.90 cents at the New York close, and 42.13 British pence from 42.12 pence.
New Zealand's two-year swap rate edged down to 2.87 percent at 5pm in Wellington from 2.88 percent last week, and the 10-year swap decreased to 3.63 percent from 3.66 percent percent.