NZ dollar falls as commodities dip on Chinese data

NZ dollar falls after Chinese data pushes commodity prices lower

By Jason Krupp

May 12 (BusinessDesk) - The New Zealand dollar fell against the greenback after softer-than-expected production data out of China pushed down commodity prices and dimmed demand for growth-linked currencies such as the kiwi and Australian currencies.

Investors’ appetite for higher-yielding, or riskier, assets, declined after softer Chinese industrial production, which showed industrial value-added output rose 13.4% in the year ending in April, down from March's reading of 14.8% growth. Commodity prices fell off the back of the Chinese data with the Thompson Reuters Jefferies CRB Index, a broad measure of 19 commodities, declining 3% to 338.10.

The ‘risk-off’ sentiment on currency markets led to an increase in demand for so-called safe haven currencies such as the U.S. Dollar and the yen rise. The Dollar Index, a measure of the greenback against a basket of six currencies, gaining to 75.26 from 74.58.

"The market is quiet skittish at the moment, and the volatility we're seeing in commodities is not really helping," said Mike Jones, a market strategist at Bank of New Zealand. "The fundamentals are still relatively strong, but the volatility we're seeing is speculative froth, which is exacerbating the moves."

The kiwi recently traded at 78.85 U.S. cents, down from 79.50 cents yesterday, and was little changed at 68.20 on the trade-weighted index of major trading partners’ currencies from 68.26 yesterday. It rose to 73.67 Australian cents from 73.16 cents previously, and dropped to 63.80 yen from 64.17 yen. It rose to 55.48 euro cents from 55.27 cents yesterday, and fell to 48.19 pence from 48.56 pence.

Currency traders will be watching for the release of Australian unemployment figures today for a read on when the Reserve Bank of Australia is likely to start raising interest rates. Markets are betting the Australian economy will have added 25,000 jobs in April and the unemployment rate will be 4.8 %. That's down from 37,800 jobs added in March and an unemployment rate of 4.9%.

Jones said the market has price in one hike already before the end of the year, but today's figures would give further clarity as to when it is likely to occur.

The kiwi dollar may trade between 78.40 U.S. cents to 79.20 cents today, he said.

(BusinessDesk)

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