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NZ dollar rises after heartening Chinese data

Monday 15th July 2019

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The New Zealand dollar rose after a raft of Chinese economic data that mostly beat expectations.

The kiwi was trading at 67.19 US cents at 5pm in Wellington from 66.81 at 7:50am while the trade-weighted index was at 73.35 points from 73.03.

The New Zealand dollar had already been gaining from US dollar weakness amid expectation that the Federal Reserve will be cutting interest rates shortly.

Although the Chinese economy grew at its slowest pace in 27 years in the June quarter, by 6.2 percent compared with the June quarter last year, other data showed industrial production was up 6.3 percent in June, well above market expectations of 5.2 percent, and retail sales were up 9.8 percent in the month compared with market expectations of 8.5 percent.

“The New Zealand dollar benefited a little on Friday from the weak US dollar but today it was all about China,” says Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services.

“China’s GDP was a disappointment but everything else was pretty solid – the weaker GDP was seen as a likely prompt for central bank stimulus in China which, of course, will benefit New Zealand and Australia,” Cavanaugh says.

China is the largest trading partner of both Antipodean countries while Australia is New Zealand’s second-largest trading partner.

The market is also preparing for New Zealand inflation data tomorrow. The market is expecting a tepid 0.6 percent quarterly increase in the Consumers’ Price Index, taking the annual growth to 1.7 percent, according to the median estimate from a poll of economists by Bloomberg.

The central bank has a dual mandate to support maximum sustainable employment and keep annual CPI inflation between 1 percent and 3 percent over the medium term, with a focus on the mid-point of 2 percent.

The New Zealand dollar was higher against other major currencies at 95.54 Australian cents versus 95.24, at 53.45 British pence from 53.11, at 59.61 euro cents from 59.24, at 72.57 yen from 72.10, and at 4.6169 Chinese yuan from 4.5942.

The New Zealand two-year swap rate edged up to 1.3582 percent from 1.3419 on Friday while the 10-year swap rate rose to 1.8600 percent from 1.8400.


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