NZD/USD rises as NZ trade balance deficit shrinks

New Zealand dollar gained ground against its US counterpart on Thursday, as New Zealands trade deficit contracted more than projected in September, while the HSBC flash PMI for China rose to a seven-month high in October.

NZD/USD climbed to a session high at 0.8446 at 2:15 GMT, after which consolidation followed at 0.8425, gaining 0.39% for the day. Support was likely to be received at October 15th low, 0.8358, while resistance was to be met at October 23rd high, 0.8520.

Today Statistics New Zealand reported that nations trade deficit narrowed to 0.199 billion NZD in September from 1.234 billion NZD a month ago, while analysts had projected a lesser drop in the deficit figure, to 0.680 billion NZD in September.

At the same time, according to HSBC, the preliminary value of the Chinese manufacturing PMI came in at 50.9 in October, reaching its highest point in seven months. The final value of this index stood at 50.2 in September, below the flash value of 51.2. This data suggested, according to HSBC, that Chinese economic recovery was becoming consolidated in the final quarter of the year after the bottoming out during the third quarter. Gained momentum was likely to continue during the upcoming months, as this may provide appropriate conditions for accelerating structural reforms. Sub-indexes of new orders and new export orders increased at a faster pace in October, while output climbed to its highest point in six months. The sub-index of employment fell, while the gauges of input and output prices rose at a slower pace. This manufacturing PMI report is crucial for the kiwi dollar, as China is New Zealands second largest export market.

Meanwhile, the US dollar weakened against most of its major rivals on Thursday ahead of a report that might reveal that the number of continuing jobless claims in the United States rose to 2.87 million during the week through October 12th from 2.86 million a week ago. “U.S. data isn’t likely to swing the picture back to talk of tapering,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney, cited by Bloomberg. “It’s more likely we will see the U.S. dollar continuing to struggle.” Also, a series of vital economic data out of the US is expected to be released later in the day, including the weekly report on initial jobless claims, nations trade balance, new home sales and the preliminary value of the manufacturing PMI, as better than expected results will certainly provide support for the greenback.

Elsewhere, the kiwi dollar was slightly higher against the Australian currency, with AUD/NZD cross dipping 0.07% on a daily basis to trade at 1.1466 at 6:49 GMT.