Thursday in Asia, the New Zealand dollar plunged to its lowest level in almost 5-weeks against the Aussie after a report showed that activity in New Zealand's manufacturing sector shrank for the eleventh straight month in March as a deepening global recession curbed demand for exports. The kiwi also slumped to an 8-day low against the greenback and the euro.
According to survey results released today by Business NZ, the Performance of Manufacturing Index (PMI) reading for March was 40.7, with readings below 50.0 indicating a contraction of activity in the sector.
Business NZ Chief Executive Phil O'Reilly said the results showed no signs of a recovery in the sector. The first quarter of 2009 has shown to be considerably worse than previous years, and further months of contraction are expected, given comments received from respondents, he said.
The average PMI readings for March from 2003 to 2008 were 53.2.
The New Zealand dollar extended its downtrend as the Organization for Economic Cooperation and Development said the country needs lower interest rates to help the economy recover from recession.
The OECD's Economic Survey of New Zealand forecast that the nation will be in recession throughout 2009 and will recover only hesitantly in 2010. The Reserve Bank still has room to go further in responding to deteriorating economic conditions, the OECD said. The much-improved inflation outlook allows scope for further easing.
New Zealand's recession is likely to extend for six quarters, the worst in more than three decades, as a contraction in the world's biggest economies curbs exports, the Reserve Bank said last month. Slowing manufacturing adds to signs the jobless rate could surge up further as firms cut costs.
New Zealand's jobless rate rose to a five-year high of 4.6 percent in the fourth quarter and could reach 6.8 percent by the first quarter of 2010, the Reserve Bank forecasts. The economy has been contracting since the first quarter of last year.
Business confidence dropped to a 35-year low in the first quarter, according to a survey from the New Zealand Institute of Economic Research published on April 07. The proportion of firms expecting to fire workers was the highest since 1991.
The manufacturing index in February was at the second- lowest level since the series began in 2002. The low was 35.2 in November 2008.
The New Zealand dollar, which closed yesterday's trading at 0.5816 against the U.S. currency dropped to an 8-day low of 0.5730 during early deals on Thursday. The next downside target level for the kiwi-greenback pair is seen at 0.5695.
The kiwi-greenback pair that jumped to a weekly high of 0.5937 on Monday has dropped more than 3% since then.
In early deals on Thursday, the New Zealand dollar weakened against the Japanese yen. At about 1:40 am ET, the kiwi-yen pair touched 56.66, down from Wednesday's closing value of 57.91. If the kiwi falls further, it may likely target a 13-day low of 56.58.
Against the Australian dollar, the New Zealand currency plunged to 1.2669 during Asian deals on Thursday. This set the lowest point for the kiwi since March 12. On the downside, 1.295 is seen as the next target level for the NZ dollar. At yesterday's close, the aussie-kiwi pair was quoted at 1.2539.
The kiwi fell to a 7-month low of 1.2950 against the Aussie on March 03. Although the kiwi has appreciated 7% thereafter, it pulled back again after reaching a 3-month high of 1.2044 on April 06. Since then, the NZ currency has lost 5%.
During Asian deals on Thursday, the New Zealand dollar slipped to an 8-day low of 2.3024 against the euro. This may be compared to Wednesday's North American session closing value of 2.2755. If the NZ dollar weakens further, it may likely target the 2.314 level.
The NZ dollar also declined today as the Chinese government report showed that the economic growth slowed to 6.1 percent in the first quarter of 2009 from 6.8 percent in the fourth quarter of 2008. This report increased speculation that the global recession may deepen.
China's expansion lagged behind its 9 percent growth for all of 2008 as a global recession cut demand for exports, prompting thousands of factories to close.
In the European session today, the Italian and the Euro-zone final CPI reports for March, Euro-zone February industrial production are expected to influence trading.
Across the Atlantic, the U.S. housing starts report for March, weekly jobless claims and the results of the Philadelphia Federal Reserve's manufacturing survey for April have been scheduled for release.
Atlanta Federal Reserve Bank Dennis Lockhart is due to speak at an annual conference at Levy Economics Institute of Bard College in New York at 12:15 pm ET.
Also, San Francisco Federal Reserve Bank President Janet Yellen is scheduled to deliver a dinner speech to an annual conference at Levy Economics Institute of Bard College in New York at 7:30 pm ET.
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