Balancing factors keep kiwi stable

The New Zealand dollar has held steady as the relative attraction of rising interest rates outshines weak Chinese manufacturing figures.

 
 

The kiwi traded at 85.35 US cents at 5pm in Wellington from 85.40 cents at 8am and 85.32 cents on Friday in New York. The trade-weighted index was 79.94 from 79.91 last week.

The HSBC flash China manufacturing purchasing managers’ index was below expectations at 48.1 this month from a final reading of 48.5 in February, signalling a third month of contracting industrial production in the world’s second-biggest economy.

The weak data sparked a short-lived sell-off in the New Zealand dollar, before support from investors keen on the local economic story and rising interest rates weighed in.

New Zealand’s Reserve Bank embarked on a tightening cycle this month, raising the official cash rate 25 basis points to 2.75 per cent, and traders have priced in a 94 per cent chance of another increase next month, according to the Overnight Index Swap curve.

“They’re most likely going to be raising rates another 25 basis points and that makes the kiwi look relatively attractive,” said Michael Johnston, senior trader at HiFX in Auckland.

“The kiwi and Aussie seem to be attracting a bit of interest on dips that don’t last that long.”

The kiwi was little changed at 93.98 Australian cents at 5pm in Wellington 93.90 cents on Friday in New York, and increased to 87.74 yen from 87.23 yen. It was little changed at 61.83 euro cents from 61.86 cents.

 
 

 
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