NZD/USD hits one month high on Chinese GDP growth

on Oct 21, 2014
Updated: Oct 21, 2019
Listen, Tuesday, October 21: The NZD/USD has risen for a second straight day after the release of data showing that the Chinese economy grew faster than expected in the third quarter.

The pair was up 0.38 percent at $0.799 as of 06:26 BST today, to be trading 4.6 percent below its 100-day simple moving average of $0.838. The kiwi touched $0.803 in intraday trading, its highest point against the greenback since 25 September.
According to a report by the Chinese National Bureau of Statistics, released at 03:00 BST, the PRC’s gross domestic product grew 7.3 percent in the third quarter. While this was the narrowest expansion of the economy since the first quarter of 2009, it bettered the 7.2 percent median estimate in a Bloomberg News survey.

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IG analyst Stan Shamu wrote that the figure was well received by the market and that the reading perhaps showed that officials were not as far from their 7.5 percent yearly target as traders had been starting to price in. Observed Shamu: “This also means the authorities will be looking to open the taps enough to ensure the growth target is achieved.”

According to Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist, as quoted by Bloomberg, “Decent exports and the fact that there is more to China’s domestic demand than real estate dampen the overall slowdown.” He continued: “Barring a major further slowdown we expect the policy stance to remain relatively restrained.”

China is now New Zealand’s biggest trading partner, having ousted Australia from the top spot and with 2013 exports to the People’s Republic amounting to NZ$9,965 million (£4.91 billion). The GDP data eased fears of slackening demand for New Zealand’s exports.

A widespread view amongst dealers is that the kiwi is likely to trade in a narrow range this week, with tomorrow’s Q3 consumer price index report by Statistics New Zealand, due at 22:45 BST, expected to show little change in the rate of inflation.
Mark Johnson, senior dealer at OMF, was quoted by The Australian newspaper as observing: “The expectation was that the (Chinese) data might have been weaker than it was actually … The question from here is should we expect some more aggressive policy action such as rate cuts.”
According to Johnson, the New Zealand dollar “still looks pretty well capped” at around $0.80 and would find support at $0.791. In his view, it would take weaker US economic data to push the kiwi higher. “I don’t see it going anywhere in a heck of a hurry.”


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