WELLINGTON (Dow Jones)--The New Zealand dollar remained strong late Thursday even as data showed China manufacturing growth and the pace of prices increases there both slowing, weighing on the Kiwi. Westpac Senior Market Strategist Sean Callow said the New Zealand dollar, along with the Australian dollar, had lost some ground after the release of the HSBC China Manufacturing Purchasing Managers Index. The HSBC PMI, a gauge of nationwide manufacturing activity, fell to 54.4 in December from 55.3 in November. A reading below 50 indicates contraction from the previous month, while a reading above 50 indicates expansion. Callow added, however, the New Zealand dollar remained higher compared with the previous day after the U.S. dollar fell broadly overnight. "It had a great run up overnight with a lot of U.S. dollar selling as (U.S. treasury) yields fell particularly following the U.S. treasury auction," he said. The fall in yields along with Tuesday's weaker-than-expected U.S. consumer confidence and housing data could mean confidence in the U.S. recovery may be waning, prompting traders to sell the U.S. dollar. He added risk appetite was also supporting the New Zealand dollar as "the Kiwi, like the Aussie, is a good-time currency." "You have commodity prices at their highest since July 2008 and you have Asian equities at their highest levels since July 2008... so you have a lot of key risk-sensitive indexes in a strong position and that is positively correlating with the Kiwi," he said. The market is expected overnight to focus on the Chicago PMI for cues. "If it comes out with one of its big surprise moves and that's to the downside that would reinforce the declines in U.S. yields and that should help the Kiwi in terms of yield spreads," Callow said. New Zealand government bonds and interest rate swaps remained unchanged with investors shrugging off offshore leads as the market remained firmly in holiday mode, a local bond trader said.

Source