NZ dollar holds near 64 cts as soft US manufacturing counters China optimism; payrolls loom

Friday 2nd October 2015

The New Zealand dollar was little changed after a weaker than expected US manufacturing gauge eroded and better than forecast Chinese industrial production data, as traders await US payrolls data which will feed into the Federal Reserve's interest rate review.

The kiwi was little changed at 63.97 US cents at 8am in Wellington from 64.08 cents late yesterday. The trade-weighted index traded at 69.75 from 69.82 yesterday.

The US Institute for Supply Management manufacturing index fell in September to 50.2, missing market expectations, and sapping investors' appetite for risk-sensitive assets, which had been bolstered by a better than expected Chinese manufacturing gauge yesterday. The manufacturing data comes ahead of the US non-farm payrolls report on Friday in Washington, which is expected to show the world's biggest economy added 201,000 jobs last month. Employment is a key component for the Fed when reviewing interest rates, and markets are undecided on whether the US central bank will start tightening policy this month or in December.

"In our session, positive China PMI readings boosted risk appetite and saw NZD break (above) 0.64 decisively," Bank of New Zealand currency strategist Raiko Shareef said in a note. "But a disappointing US ISM knocked markets back onto the defensive. We continue to look for NZD outperformance in the near-term, but are wary of souring risk sentiment."

Investors will be watching Australian consumer spending data today for direction during the Asian trading session ahead of the US payrolls report. The kiwi traded at 90.97 Australian cents from 90.87 cents yesterday.

A manufacturing gauge for the eurozone met expectations, with an expansionary reading of 52, though German industrial production slowed and investors will be watching to see the fall-out of the Volkswagen emissions scandal. The kiwi fell to 57.19 euro cents from 57.54 cents yesterday, and traded at 42.27 British pence from 42.37 pence.

The local currency fell to 76.76 yen from 77.10 yen yesterday, and slipped to 4.0690 Chinese yuan from 4.0760 yuan.

BusinessDesk.co.nz

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