NZ dollar little changed as Chinese growth slows less than expected

Monday 19th October 2015

The New Zealand dollar was little changed in local trading as Chinese economic data gave a mixed message for the world's most populous nation, with gross domestic product slowing less than expected, though fixed-asset investment was dialled back to a 15 year low and industrial production was below forecast.

The kiwi traded at 67.96 US cents at 5pm in Wellington from 67.95 cents at 8am, and 68.08 cents on Friday in New York. The trade-weighted index slipped to 72.72 from 72.99 last week.

China's economy grew at a 6.9 percent annual pace in the three months ended Sept. 30, according to National Bureau of Statistics data. That was ahead of the 6.8 percent pace of growth economists were expecting, and while fixed asset investment rose at its slowest pace since 2000 and industrial output was below forecasts, the GDP expansion and stronger services sector helped allay fears about the strength of the world's second biggest economy, which is also New Zealand Australia's largest trading partner.

"GDP was higher than the market expected, though it's still low for China," said Michael Johnston, senior trader at HiFX in Auckland. "The kiwi's getting a little bit stretched - it's rallied over 10 percent from the lows of a few weeks ago."

Fonterra Cooperative Group's GlobalDairyTrade auction on Tuesday in the US will be watched by traders looking to gauge the local economy after the world's biggest dairy exporter scaled back supply to help push up milk product prices.

HiFX's Johnston said the kiwi faces risks to the downside, with the recent appreciation in the currency putting more pressure on the Reserve Bank to cut interest rates further.

A BusinessDesk survey of 11 currency strategists predicts the local currency will trade between 66 US cents and 70.60 cents this week. Five expect the kiwi to decline, four say it may rise and two see it remaining largely unchanged.

New Zealand's two-year swap rate edged up one basis point to 2.71 percent at 5pm in Wellington and the 10-year swap decreased two basis points to 3.47 percent.

The local currency was little changed at 4.3229 Chinese yuan from 4.3246 yuan on Friday in New York, and fell to 93.42 Australian cents from 93.70 cents. It decreased to 59.82 euro cents from 60 cents last week, and was little changed at 44.02 British pence from 44.10 pence. The kiwi traded at 81.15 yen from 81.30 yen on Friday in New York.

BusinessDesk.co.nz

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