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NZ dollar falls as China, Europe manufacturing remains weak

NZ dollar falls as China, Europe manufacturing counters Fed euphoria

By Jonathan Underhill

Aug. 24 (BusinessDesk) – The New Zealand dollar fell from a two-week high as data showing weaker manufacturing in China while factories in Europe remain in contraction took some of the gloss off the increasing certainty that the Federal Reserve will act to stimulate the world’s biggest economy.

The kiwi dollar fell to 81.28 US cents from 81.67 cents at 5pm in Wellington yesterday. It traded as high as 81.85 cents overnight. The trade-weighted index fell to 72.85 from 73.15.

China’s HSBC Flash PMI, a preliminary gauge of manufacturing, fell to 47.8 this month from 49.3 on a scale where a reading below 50 signals contraction. Meantime, Markit Economics’ composite index of services and manufacturing for the euro zone stood at 46.6 and manufacturing in Germany was on 45.1.

In the US, Federal Bank of St. Louis President James Bullard told CNBC the world’s biggest economy has picked up pace since the meeting covered by the FOMC minutes that signalled further stimulus.

“Worries about a faltering Chinese economy have taken some of the gloss off,” said Mike Jones, a strategist at Bank of New Zealand. “The ‘growth-sensitive’ NZD/USD has eased off its overnight highs.”

In Australia today, Reserve Bank Governor Glenn Stevens is due to appear before lawmakers and traders will be on watch for any comments about the high Australian dollar, Jones said.

The Australian dollar has dropped overnight to trade at $1.0433 from $1.0513 late yesterday. The New Zealand dollar traded at 77.82 Australian cents from 77.69 cents.

The kiwi fell to 64.69 euro cents from 65.14 cents after the manufacturing and services data and comments from German Chancellor Angela Merkel that the euro zone must “stand by our obligations”. She is preparing to meet Greek Prime Minister Antonis Samaras, who will ask for more time to abide by terms of financial aid.

Reuters reported that Spain is in talks with its euro zone partners over the terms of such its own aid package, needed to bring its borrowing costs down to a sustainable level.

The New Zealand dollar fell to 63.75 yen from 64.14 yen and dropped to 51.24 British pence from 51.41 pence.

(BusinessDesk)

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