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NZD extends gains on Aussie

NZN 1/06/2017 Jonathan Underhill

The New Zealand dollar has extended gains against its Aussie counterpart, which has suffered in the face of weaker iron ore prices and a drop in Chinese manufacturing activity.

The kiwi rose to A95.76c as at 8am in Wellington and earlier reached a new four-month high of A95.81c, from A95.60c cents late on Thursday.

The kiwi fell to US70.63c from US70.75c on signs of a stronger US labour market.

Iron ore prices have dropped to an eight-month low and in Australia's biggest market for the raw material, data on Thursday showed the Caixin manufacturing PMI fell for a third straight month in May to 49.6, a level that signals contraction, from 50.3.

While Australian retail sales figures for April showed stronger-than-expected 1 per cent growth, private spending rose by a smaller-than-forecast 0.3 per cent.

Meanwhile, in the US the ADP employment survey showed 253,000 jobs added in May, compared to a forecast 180,000, boosting speculation the official non-farm payrolls data tonight will also be strong.

"The NZD/AUD continued to nudge higher with the data-flow on both activity and commodity prices continuing to flatter New Zealand," NZ Bank New Zealand rural economist Con Williams said.

"That seems unlikely to change anytime soon, but the trick is picking when it's all priced in. The USD also strengthened, led by robust data."

Economists expect the payrolls report will show the US economy added 180,000 jobs last month, down from 211,000 in April but still a robust number and after the ADP report traders said there is scope for an upside surprise.

However, wage inflation may remain subdued.

The data should keep intact expectations of a US Federal Reserve interest rate hike this month, after Fed officials reiterated the view that there will be two more hikes this year.

There was no immediate market reaction to US President Donald Trump's announcement that the US will quit the Paris climate accord but then negotiate to re-enter the pact on terms more favourable to America.

The trade-weighted index was little changed at 76.39 from 76.40.

The kiwi traded at 62.94 euro cents from 62.91 cents late on Thursday and declined to 54.79 British pence from 54.97 pence.

It fell to 4.8008 yuan from 4.8028 yuan and traded at 78.59 yen from 78.50 yen.

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