NZ Dollar Defies Negative Fundamentals, Bouncing After Decline

The New Zealand dollar rallied today after falling earlier. Surprisingly, the rally started after the release of disappointing macroeconomic reports in China — New Zealand’s biggest trading partner. Domestic macroeconomic data, which was not that great as well, had smaller impact on the currency. Yet it was also puzzling, driving the kiwi slightly higher, not lower.
The National Bureau of Statistics of China reported that the Consumer Price Index rose 1.7% in January, year-on-year. Analysts had expected the same 1.9% rate of growth as in December.
The Producer Price Index increased just 0.1%. It was a significant slowdown from the December’s 0.9% rate of increase and slower than the 0.3% rate of growth promised by economists.
As for economic data in New Zealand, the BusinessNZ Performance of Manufacturing Index slipped from 54.8 to 53.1 in January. While the index remained firmly above the neutral 50.0 level, BNZ Senior Economist Doug Steel commented on the result:

Looking beyond the steady headline reading, the details of this month’s survey do raise some questions about the durability and pace of the current expansion.

NZD/USD rallied from 0.6835 to 0.6854 as of 11:39 GMT today after falling to the daily low of 0.6809 earlier. EUR/NZD declined from 1.6513 to 1.6449, reversing the earlier rally to 1.6573. NZD/JPY opened at 75.49, fell to the session minimum of 75.12, but rebounded to 75.70 later.

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