NZ dollar falls as businesses get gloomier

Monday 30th September 2019

The New Zealand dollar was weaker after business pessimism grew even deeper in the latest ANZ Bank monthly survey and the gloomy tone was compounded after official Chinese data showed manufacturing contracted again in September.

The kiwi was trading at 62.66 US cents at 5pm in Wellington from 62.81 at 8:05am while the trade-weighted index was at 69.97 points from 70.25.

The ANZ survey showed a net 53.5 percent of the 391 respondents expect general business conditions will deteriorate during the coming year, worse than 52.3 percent in August.

Even worse, firms' optimism about their own activity also fell, with a net 1.8 percent now expecting things to get worse compared with the net 0.5 percent in the prior survey. It was the fourth fall in a row and is the lowest read since April 2009.

The release of the unofficial Caixin manufacturing data for China briefly raised spirits and the flagging kiwi because it showed a slight expansion.

"Once the dust settled, it doesn't change the fact that our business confidence is, for lack of a better phrase, in the toilet," says Mike Shirley, a dealer at Kiwibank.

BNZ economist Doug Steel says the ANZ survey results make it more likely the Reserve Bank will cut its official cash rate again in November.

The survey " offered very little by way of redeeming features in the detail. Whether the negativity is feeding on itself or is being driven by new or deeper fundamental concerns is difficult to tell, but there is no doubt that businesses are pessimistic about the economic outlook," Steel says.

The major reason for Chinese manufacturing starting to contract is that country's trade war with the United States.

The official index came in at 49.8 points for September – a reading below 50 indicates activity is contracting – but the Caixin index came in at 51.4 points.

Although official high-level talks between the two countries' officials are set to resume next week after China celebrates the 70th anniversary of the People's Republic, the US is reportedly looking at preventing Chinese companies from listing on US exchanges and maybe even delisting companies that are already there.

The Reserve Bank of Australia is set to make its latest decision on monetary policy tomorrow afternoon and is expected to cut its cash rate by 25 basis points to a record low of 0.75 percent.

The New Zealand dollar was at 92.71 Australian cents from 92.89, at 51.01 British pence from 51.03, at 57.32 euro cents from 57.38, at 67.64 yen from 67.81, and at 4.4626 Chinese Yuan from 4.4732.

The two-year swap rate edged down to a bid price of 0.9240 percent from 0.9432 on Friday while 10-year swaps rose to 1.1975 percent from 1.1950.

(BusinessDesk)

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