NZ dollar extends rally as manufacturing data stokes global recovery hopes

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The New Zealand dollar rose to a new 4 ½ month-high against the greenback and held near a decade-high against the euro as upbeat manufacturing data across economic powerhouses the United States, Europe and China expanded, indicating the global economy is recovering.

The New Zealand dollar rose as high as 83.53 US cents, the highest since early September, and recently traded at 83.26 cents, up from 82.35 cents yesterday at 5pm. The kiwi rose to 63.23 euro cents from 63 cents yesterday, having touched 63.32 cents, the highest level since the common currency was first issued in 2002.

Investors regained confidence in the global economic recovery amid recent volatility over the past few months after manufacturing data in the US, Europe and China all proved better-than-expected.

Manufacturing expanded at the fastest pace since June in the US, rising to 54.1 in January from 53.1 in December, according to the Institute for Supply Management.

Across the Atlantic, Germany posted its first increase in manufacturing output in four months, while in the United Kingdom growth in manufacturing climbed to an eight-month high. Yesterday, figures showed Chinese manufacturing unexpectedly expanded last month.

"It all started with the positive news yesterday out of China - it was a fairly positive horizon after that," said Alex Sinton, senior dealer at ANZ New Zealand. "That created a fair amount of demand for our currency."

Sinton said the kiwi will probably "struggle to push higher on the day," though the outlook is "fairly positive."

Prices of dairy products sold on Fonterra's GlobalDairyTrade platform fell for the third time in four sales with declines for all six product types on offer. The GDT-TWI Price Index fell 0.9 per cent US$3,666 per metric tonne. It was expected to remain around US$3,700 a tonne.

"We did have a drop in the GlobalDairyTrade platform, but the prices are remaining at an elevated level," Sinton said, with Fonterra continuing to report record export levels.

In New Zealand, the ANZ Commodity Price Index is set for release this afternoon, followed by Statistics New Zealand travel and migration statistics tomorrow.

The New Zealand dollar rose to 77.66 Australian cents from 77.54 cents yesterday and gained to 63.42 yen from 62.73 yen. The kiwi gained to 52.56 British pence from 52.25 pence yesterday.

The trade-weighted index increased to 72.97 from 72.50 yesterday.