NZ dollar falls vs Aussie as PBoC warns against one-way yuan bets

The kiwi declined to 90.69 Australian cents as at 8am in Wellington. Photo: Lynn Grieveson

The New Zealand dollar fell against its Australian counterpart as reports the People's Bank of China was alert to the risks facing its currency stoked risk appetite among investors, although that didn't spill over to the local currency ahead of tomorrow's central bank meeting.

The kiwi declined to 90.69 Australian cents as at 8am in Wellington from 90.98 cents yesterday. It was little changed at 67.33 US cents from 67.26 cents.

The Australian dollar was among gainers after Bloomberg reported the People's Bank of China asked banks not to chase momentum in the yuan, which has depreciated 6.7 percent since mid-June, while Chinese foreign reserves data showed a modest increase that was ahead of market expectations. China's Shanghai Composite Index rose 2.7 percent yesterday, its biggest gain in more than two years, and Wall Street was up in late trading.

"It’s a signal that the PBoC is alert to the risks facing the yuan and doesn’t want to see the currency as a one-way bet, and the "stronger forward exchange rate as a result of the PBoC actions provides a warning signal for those who want to short the yuan aggressively," Bank of New Zealand senior markets strategist Jason Wong said in a note. "A more positive day for the Chinese yuan dragged the AUD higher but the NZD has been left behind and is flat, even with higher risk appetite."

Prices at the latest Global Dairy Trade auction were flat, with whole milk powder prices up 0.1 percent to US$2,958 a tonne. Wong said the move was "widely expected."

Local data today include the Reserve Bank's survey of expectations ahead of tomorrow's policy review, while Finance Minister Grant Robertson is speaking to a business audience this morning.

The kiwi fell to 4.5980 Chinese yuan from 4.6106 yuan yesterday and traded at 74.99 yen from 74.90 yen. It decreased to 58.04 euro cents from 58.21 cents yesterday and traded at 52.02 British pence from 51.97 pence.

The trade-weighted index was at 72.51 from 72.62 yesterday.