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NZ dollar falls vs Aussie on China data, upbeat business across theTasman

Tuesday 14th February 2017

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The New Zealand dollar fell against the Australian dollar after a strong business survey across the Tasman and better-than-expected data out of China.

The kiwi declined to 93.52 Australian cents as at 5 pm in Wellington from 93.92 late yesterday. It was at 71.75 US cents from 72 cents late yesterday. The trade-weighted index fell to 78.17 from 78.26.

"It's been more of an Aussie day," said Imre Speizer, senior FX strategist at Westpac Banking Corp. "First there was a decent business conditions survey, so growing signs the Australian economy is improving. The second part of that story was the Chinese CPI and PPI were both a bit higher than expected, pointing to signs of improvement there as well," he said.

National Australia Bank's monthly survey of more than 400 firms showed its index of business conditions jumped 6 points to +16 in January. That took it back to the highs seen in mid-2007 and well above the long-run average of +5, Reuters reported. In China, the producer price inflation picked up more than expected in January to near six-year highs as prices of steel and other raw materials extended a rally, adding to views that global manufacturing activity is building momentum. China consumer inflation also rose more than expected to near three-year highs.

"Both of those things benefited the Aussie but were neutral for Kiwi," said Speizer.

He said the market is now closely focused on US Federal Reserve chair Janet Yellen's Senate testimony later in the global trading day. Yellen is scheduled to appear before the Senate Banking Committee at about 4am NZ time tomorrow and Speizer said investors will be looking for any clues about possible rate hikes against a backdrop of market speculation she will reiterate the Fed's view that there could be three interest rate hikes this year, starting as soon as next month.

"We may get a good move in the US dollar tonight," he said.

The kiwi fell to 81.48 yen from 82.02 yen. It declined to 57.24 British pence from 57.63 pence and fell to 67.67 euro cents from 67.80 cents. The kiwi slipped to 4.9354 yuan from 4.9551 yuan.

New Zealand's two-year swap rose 2 basis points to 2.33 percent while 10-year swaps rose 3 basis point to 3.45.

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