The New Zealand dollar touched a two-month high overnight, approaching 87.50 US cents, after a measure of Chinese manufacturing was stronger than expected, boosting sentiment about Asia's largest economy.
The kiwi touched 87.48 US cents overnight, its highest level since May 6 when it reached 87.79 cents, the highest in more than two-and-a-half years. The local currency was trading at 87.12 US cents at 8am in Wellington, from 87.32 cents at 5pm yesterday. The trade-weighted index slipped to 81.01 from 81.16 yesterday.
HSBC's monthly survey of purchasing managers released yesterday signalled the first expansion in six months in China's manufacturing sector. The index rose to 50.8 in a scale where a reading above 50 indicates expansion, exceeding forecasts for 49.7 and ahead of 49.4 last month. China is New Zealand's biggest trading partner, and kiwi businesses exported $11.4 billion of goods in the year through April.
"The kiwi rose to a fresh two-month high mainly because of the strong China manufacturing PMI result yesterday," said Imre Speizer, senior market strategist at Westpac Banking Corp. "We and Australia have close trade ties to China. A stronger economy there means they buy more of our dairy products etc."
The New Zealand dollar slipped later in the evening after European Central Bank president Mario Draghi told Dutch newspaper Telegraaf that stimulus would continue until at least the end of 2016, implying no interest rate rises before then. The resulting decline in European bond yields affected yields in other markets and weakened the kiwi, Speizer said.
