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NZ dollar falls as Chinese growth misses forecast

Tuesday 19th January 2016

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The New Zealand dollar fell as China's economic growth came in below expectations, weighing on the Australasian currencies due to their trade exposure to the world's second biggest economy.

The kiwi dipped to 64.34 US cents from 64.47 cents immediately before the data, and down from 64.67 cents yesterday. The trade-weighted index declined to 71.29 from 71.51 yesterday.

Official government figures show China's gross domestic product grew 6.8 percent in the three months ended Dec. 31 from a year earlier, missing expectations by 0.1 of a percentage point, while other releases showed slower Chinese retail sales, industrial production and fixed-asset investment. That weighed on the Australian and New Zealand dollars, with both nations reliant on China as a trading partner. 

The Chinese reports come as investors wait for US markets to resume trading following a public holiday and Friday's slump on Wall Street. Traders will also be watching the overnight GlobalDairyTrade auction, with futures pricing indicating a fall in dairy prices. 

"The Chinese data came in either on expectations or slightly below expectations - the market fluctuated around it, but is in a crouch and hold situation ahead of the US return from holidays and the milk auction," said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. "There's potential for the auction to come in weaker and that will probably put pressure on the kiwi dollar." 

Local data tomorrow is expected to show annual inflation continued to track below the Reserve Bank's target band of between 1 percent and 3 percent in the December quarter, while figures today showed an increase in November guest nights as the country attracts record tourist numbers. 

Meantime, the New Zealand Institute of Economic Research's quarterly survey of business opinion showed firms recovered lost confidence in the final three months of 2015, and anticipate a pick-up in their own trading in the coming period. 

The two-year swap rate decreased two basis points to 2.67 percent at 5pm in Wellington, while 10-year swaps increased one basis point to 3.46 percent.

The local currency rose to 93.69 Australian cents from 93.49 cents yesterday, and fell to 4.2331 Chinese yuan from 4.2539 yuan. It was little changed at 75.60 yen from 75.71 yen yesterday, and slipped to 59.09 euro cents from 59.35 cents. The kiwi decreased to 45.13 British pence from 45.30 pence yesterday.

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