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NZ dollar slips after Chinese manufacturing data, seen resuming climb

24 Mar 2015

The New Zealand dollar fell broadly after data showed weaker-than-expected manufacturing in the nation's No. 2 market of China, having reached new record highs against the Australian dollar and the euro, and a two-month high versus the greenback.

The kiwi traded at 97.21 Australian cents at 5pm in Wellington, having hit a post-float high of 97.82 overnight, from 97.17 cents yesterday. The local currency traded at 76.30 US cents, down from a two-month high 76.63 cents overnight and from 75.89 cents yesterday.

The preliminary HSBC China Manufacturing Purchasing Managers Index fell to an 11-month low of 49.2 in March, from 50.7 in February, on a scale where 50 marks the line between contraction and expansion. The kiwi had been strengthening as the nation's relatively high interest rates draw investors looking for yield in a world where 20 central banks have cut rates this year. The European Central Bank is now printing money and traders are betting Australia's central bank will cut interest rates again from a record low.

"The degree of pullback post the Chinese data was pretty small," said Imre Speizer, strategist at Westpac Banking Corp. "There's every chance we can touch parity with the Australian dollar in the next few weeks. Against the euro, it (the kiwi) looks to have pretty strong momentum."

The New Zealand dollar fell to 69.95 euro cents, having earlier reached a record 70.74 cents, from 70.20 cents yesterday, amid reports German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras remain at odds over the terms of a revised Greek bailout after talks in Berlin.

Parity against the euro is unlilkely, barring some seismic shift such as the euro disintegrating, because a lot of bad news is already priced into the common currency, Speizer said. "Our core view is that the euro languishes for a while but then picks up from the bottom."

Against the greenback, the risk is renewed selling of US dollars that would push the kiwi higher, he said. While US non-farm payrolls has been strong, across all the data, "momentum has slipped."

The kiwi traded at 51.10 British pence, having earlier reached a two-month high of 51.24 pence, from 50.80 pence yesterday. The New Zealand dollar rose to 91.37 yen from 91.07 yen yesterday. The trade-weighted index was at 79.54, down from its high of 79.66, although up from 79.33 yesterday.

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