NZ dollar gains vs. Aussie amid concerns about Chinese slowdown

Thursday 7th January 2016

The New Zealand dollar advanced against the Australian dollar as investors deemed Australia's commodity exports would be harder hit by a slowdown in China than New Zealand's.

The kiwi jumped to 93.98 Australian cents at 8am in Wellington, from 93.30 cents at 5pm yesterday. The local currency fell to 66.29 US cents from 66.53 cents yesterday.

For currency markets, the year so far has been dominated by jitters about the slowing Chinese economy. China allowed the yuan to weaken further yesterday, stoking concerns the world's second-largest economy may be slowing more sharply than expected. A report yesterday showed the Chinese services sector expanded at its slowest rate in 17 months in December, which followed weaker-than-expected manufacturing data at the weekend and raised concerns about the rebalancing of the economy towards services. Investors are betting a slowdown in China will hurt Australian exports of so-called hard commodities more than New Zealand exports of soft commodities.

"The fact that the New Zealand dollar is down against most but up against the Australian dollar shows that it is probably a hard commodity story and that's been reinforced overnight with further falls in the New Zealand dollar and more so the Australian dollar on the back of falls in oil and iron ore and other commodity prices," said Peter Cavanaugh, an adviser at Bancorp Treasury Services. "The world's worry spotlight has now gone on to China."

In Australia today, trade and building approvals data is scheduled for release.

The minutes to the Federal Reserve's Dec. 15-16 meeting, published at 8am New Zealand time, showed policymakers decided to raise US interest rates for the first time in almost a decade after almost all of them gained confidence inflation was poised to rise. Some members said the decision was a close call and the minutes reiterated that rate increases would be at a gradual pace.

The New Zealand dollar slipped to 61.62 euro cents from 61.90 cents yesterday, fell to 78.62 yen from 78.92 yen, and weakened to 4.3456 yuan from 4.3545 yuan. It was little changed at 45.34 British pence from 45.37 pence yesterday. The trade-weighted index was unchanged at 72.94.

BusinessDesk.co.nz

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