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NZ dollar gains on Australian trade figures, Chinese services

The New Zealand dollar gained after better than expected Australian trade data and upbeat Chinese services sector figures stoked optimism about demand for the trans-Tasman currencies.

The kiwi rose to 77.25 US cents at 5pm in Wellington from 76.95 cents at 8am and 76.28 cents yesterday. The trade-weighted index advanced to 78.83 from 78.11 yesterday.

Government figures showed Australia's trade deficit widened to A$925 million in November from A$880 million a month earlier as falling commodity prices weighed on export receipts, though was smaller than the A$1.6 billion shortfall predicted by economists. That lifted optimism about the Australian economy, which has been struggling in recent months, and that sentiment was spurred by the growth in China's services sector in the latest HSBC flash PMI. China is the biggest trading partner of Australia and New Zealand.

"After the slightly better global picture we've seen a quick recovery," said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. "The Aussie is above 81 US cents and the kiwi's back above 77 with a bit of wiggle-room for further upside."

OMF's Ive said the local currency will probably trade between 76.80 US cents and 77.90 cents, with the upcoming GlobalDairyTrade auction the next major event for the kiwi. Dairy prices halved last year as an oversupply in China weakened demand, while other nations ramped up their production.

The kiwi gained to 94.94 Australian cents at 5pm in Wellington from 94.61 cents yesterday, and advanced to 4.8009 Chinese yuan from 4.7480 yuan.

Traders will continue to watch services PMI figures in Europe as tepid inflation in Germany added to fears of deflation in the region. European Central Bank president Mario Draghi last week said deflation was a risk, which was interpreted as meaning the central bank plans to embark on a quantitative easing programme to bolster the regional economy, while Greece's political instability has sparked fears the Mediterranean nation may still leave the European Union.

The kiwi climbed to 64.68 euro cents from 63.88 cents yesterday, and gained to 50.62 British pence from 49.91 pence. It was little changed at 92.15 yen from 92.02 yen yesterday.

New Zealand's two-year swap rate increased to 3.78 from 3.76 yesterday at 5pm, while the 10-year swap fell to 4 from 4.04 yesterday.