NZ dollar extends slide after China manufacturing gauge falls to 5-year low

Wednesday 23rd September 2015

The New Zealand dollar extended its decline after a measure of Chinese manufacturing plunged to the lowest level since March 2009, driving down stock markets across Asia and weighing on growth-linked currencies such as the kiwi.

The kiwi fell to 62.63 US cents as at 5pm in Wellington, from 62.88 cents at the start of the day and from 63.14 cents yesterday. The trade-weighted index fell to 68.25 from 68.43 yesterday.

The preliminary Purchasing Managers’ Index (PMI) from Caixin Media and Markit Economics edged down to 47.0 in September, undershooting market expectations and down from 47.3 in July. The performance of the Chinese economy is under intense scrutiny after stocks plunged from their June peak and the Federal Reserve cited global uncertainty in refraining from raising US interest rates last week.

The PMI "contributed to a broader unsettled risk environment - a theme in which the kiwi and the Aussie will under-perform," said Raiko Shareef, currency strategist at Bank of New Zealand. The kiwi is now very close to the bottom of its range and may not fall much further "unless we have a broader wholesale deterioration in risk sentiment."

He said there is support for the kiwi at 62.45 US cents and also at 62 cents.

Overnight, the Thomson Reuters/Core Commodity CRB Index, a measure of 19 commodity prices, fell 1 percent on concern China's economy is growing at a slower pace than the official 7 percent annual target. The Australian dollar also dropped after the PMI figures. China is Australia's biggest market and New Zealand's second-largest after Australia.

The kiwi rose to 89.05 Australian cents from 88.57 cents yesterday, and fell to 3.9958 yuan from 4.0233 yuan. The local currency fell to 74.99 yen from 76.05 yen yesterday, and was little changed at 40.80 British pence from 40.70 pence.

The two-year swap rate rose 1 basis point to 2.66 percent and 10-year swaps were unchanged at 3.49 percent.

BusinessDesk.co.nz

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