NZ dollar falls as China cuts growth target

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The New Zealand dollar fell against the greenback as China, the fastest-growing major economy, cut its growth target to the lowest level since 2005, sapping demand for growth-linked assets including the kiwi.

The New Zealand dollar fell to 82.09 US at 8am from 82.75 US cents at 5pm yesterday. The kiwi declined to 66.75 yen from 67.58 yen.

China, New Zealand's second-biggest trading partner, cut its 2012 growth target to an eight-year low of 7.5 per cent from 8 per cent, a sign that its leaders are determined to cut reliance on exports and capital spending in favour of consumption.

"That was really what knocked back the New Zealand dollar and the Australian dollar," said Nick Tuffley, chief economist at ASB.

China comfortably surpassed the 8 per cent target set in the previous eight years and still plans to aim for inflation of about 4 per cent, unchanged from 2011.

The kiwi fell to 76.91 Australian cents from 77.28 cents ahead of the Reserve Bank of Australia's meeting today. It is widely expected that the RBA will keep the cash rate target at 4.25 per cent, according to all 24 economists surveyed in a Bloomberg poll.

"The New Zealand dollar is likely to be in a holding pattern until 4.30 this afternoon," when the announcement is released, Tuffley said. "It is a key risk for today - it is the tone of the statement that will be important."

The New Zealand dollar fell to 62.07 euro cents from 62.71 cents after manufacturing and services in the euro zone contracted more than expected. The composite Purchasing Managers' Index for the euro zone dropped to 49.3 from 50.4 in January, according to the London-based Markit Economics. That was below the initial figure of 49.7 published on Feb. 22.

The US, the world's largest economy, released a report showing orders for manufactured goods fell for the first time in three months to 1 per cent, while that was better than the 1.5 per cent economists had forecast it was the largest decline since October 2010.

In New Zealand, the government financial statements for the 7 months to January 31 are set for release this morning.

The New Zealand dollar fell to 51.57 British pence from 52.37 pence.

The trade-weighted index slipped to 72.67 from 73.13.