Kiwi bounces as China PMI surprises

JASON KRUPP
Last updated 17:15 24/07/2012

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The New Zealand dollar snapped a weak overnight streak against the greenback, with appetite for growth-linked currencies boosted by better than expected manufacturing data out of China.

The kiwi recently traded at US79.20 cents, up from US78.93 at 8am, while on the Trade Weighted Index of major trading partners' currencies, it rose to 71.92 from 71.72.

The latest HSBC Purchasing Manager Index data showed July factory activity in China rose to its highest level since February, soothing fears the world's second biggest economy is headed for a hard landing.

China ranks as the New Zealand's second biggest trading partner after Australia.

"The data has eased some of the extreme pessimism on China and helped the kiwi and aussie," said Mike Jones, a market strategist at Bank of New Zealand. "We've also seen quite a lot of exporters coming to the market on the dips to buy cover."

He said the kiwi was likely to ride the momentum into the European session, although concerns over Spanish growth - which slowed further in the second quarter - were likely to stalk the market.

"It's hard to see the Spanish news getting any better, and given Spanish borrowing costs are entrenched above 7 per cent it's only a matter of time before the government calls for help," he said.

On the crosses the kiwi recently traded at 76.82 Australian cents, up from A76.72c at 8am, and rose to 61.99 yen from 61.90 yen. The currency rose to 65.27 euro cents from 65.02 euro cents, and gained to 50.99 pence from 50.83 pence.

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- BusinessDay.co.nz

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