NZ dollar pares losses as bargain hunters move in

The New Zealand dollar pared some of its recent losses against the greenback.

The New Zealand dollar pared some of its recent losses against the greenback as bargain hunters moved in despite weak data from Australia and China that would normally have weighed on the kiwi.

The local currency traded at 65.99 at 5pm in Wellington versus 65.72 cents at 8am and late yesterday. The trade-weighted index was at 71.76 from 71.47 yesterday.

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The kiwi's slump to its lowest level since March 2016 on the back of a more dovish-than-expected central bank continued to attract buying from exporters keen on locking in the low rate. Investors shrugged off news that Australian business confidence fell in July and that Chinese retail sales, industrial output and urban investment all grew by less than forecast in July.

Given that China and Australia are New Zealand's two largest trading partners, the data would normally have curbed appetite the kiwi. Current low levels, however, are proving attractive.

"It's picked itself up off the ground ... which is amazing given that we have had a string of weak data," said Ross Weston, a senior trader at Kiwibank.

"I think there is a bit of profit-taking going on, but normally the type of data we've had today would have pushed it the other way," he said.

Weston noted the kiwi has largely recovered against the Australian dollar since falling sharply last week after the central bank said it would hold rates low for longer and reiterated a cut was possible.

It was trading at 90.71 Australian cents from 90.55 cents yesterday and 90.77 cents just before last Thursday's central bank announcement.

Looking ahead, Weston said markets will be watching for data out of the eurozone, including industrial production and the second estimate of second-quarter GDP growth.

The kiwi traded at 57.87 euro cents from 57.81 cents yesterday and at 51.66 British pence from 51.53 pence. The local currency rose to 73.12 yen from 72.40 yen yesterday and 4.5407 Chinese yuan from 4.5200 yuan.

New Zealand's two-year swap rate rose 2 basis points to 2.02 per cent while 10-year swaps lifted 2 basis points to 2.88 per cent.