The New Zealand dollar is poised for a 5.2 percent gain in the first three months of 2012, though a looming slowdown in the Chinese economy may derail further gains.
The kiwi rose to 81.89 US cents at 5pm from 81.52 cents at 8am and 81.64 cents. Since the start of the year it has climbed more than 4 US cents from 77.81 cents as fears over Europe’s sovereign debt crisis eased. The trade-weighted index rose to 72.81 from 72.68, and is up 4.7 percent in the quarter.
Traders and fund managers will reassess their asset allocations as the first quarter comes to a close in a three-month period where equity markets rallied on prospects of accelerating growth in the US and greater confidence the European Union won’t fall apart over ballooning government debt among some of its members.
Still, the threat of bigger slowdown in China’s economic has dimmed investors’ appetite for higher-yielding, or riskier, assets in recent weeks after miner BHP Billiton indicated there was tepid demand for iron ore and the HSBC flash purchasing managers index indicated a contraction in Chinese factory activity. China’s actual PMI comes out on Sunday.
“China’s PMI comes out on Sunday and that could affect Monday morning trading” with investors expecting a weak figure, said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. “It’s going to be interesting to see how the funds adjust their portfolios” and that could push the kiwi either way, he said.
New Zealand’s currency held near a six-month high against its Australian counterpart ahead of the Reserve Bank of Australia’s review of monetary policy on Tuesday, where Governor Glenn Stevens is expected to keep the benchmark rate unchanged at 4.25 percent. It traded at 78.71 Australian cents from 78.76 cents yesterday.
Traders are pricing in 77 basis points of cuts to Australia’s target cash rate over the next 12 months, according to the Overnight Index Swap curve, which reduces the interest rate advantage Australia has over New Zealand, where the official cash rate is 2.5 percent and traders are betting Governor Alan Bollard will hike the benchmark rate 25 basis points in the coming year.
The currency was little changed at 61.33 euro cents from 61.29 cents yesterday, and edged down to 51.25 pence from 51.35 pence. It fell to 67.15 yen from 67.51 yen yesterday.
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