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NZ dollar rises on business confidence, Chinese manufacturing, seen extending gains

Wednesday 31st May 2017

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The New Zealand dollar rose as a pickup in business confidence and stronger-than-expected Chinese manufacturing data added to positive sentiment for the kiwi.



The kiwi dollar traded at 70.85 US cents as at 5pm in Wellington, and earlier touched 71.17 cents, from 70.46 US cents late yesterday. The trade-weighted index rose to 76.57 from 76.31 yesterday.



China's National Bureau of Statistic's official Purchasing Managers' Index (PMI) beat estimates at 51.2 this month, showing no drop-off from April, amid strong activity in the steel sector, while that nation's services sector also showed a pickup in activity. The Chinese figures were released around the same time as the ANZ Business Outlook, which showed New Zealand firms became more confident this month and predicted higher profits and inflation. Meanwhile, the Reserve Bank's financial stability report, which doesn't typically move markets, added to positive sentiment by saying risks had abated in the past six months.



"There's been a continuing stream of news supporting the kiwi, and at the same time a weakening US dollar," said Imre Speizer, senior market strategist at Westpac Banking Corp. 



Speizer's one-week outlook is for the kiwi to move into a higher trading range of 71 US cents to 72 cents and he said the currency "can go higher still this week".



The kiwi rose above 71 US cents for the first time since early March overnight in the face of weak US data and ran up again with the Chinese PMI and confidence survey.The US core PCE price deflator rose 1.5 percent year-on-year, meeting market expectations but also the lowest annual inflation in about 18 months, while the Conference Board measure of consumer confidence fell for a second month in May. 



The kiwi rose to 95.09 Australian cents from 94.88 cents late yesterday. The kiwi traded at 63.41 euro cents from 63.33 cents and rose to 4.8423 yuan from 4.8283 yuan. It rose to 55.28 British pence from 54.99 pence and rose to 78.62 yen from 78.12 yen.



New Zealand's two-year swap rate fell 2 basis points to 2.20 percent and 10-year swaps fell 4 basis point to 3.17 percent.




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