NZ dollar tumbles after weak Chinese trade data points to demand drop

The New Zealand dollar tumbled after figures showed China's exports unexpectedly fell while its imports recorded a bigger decline than forecast, signalling weaker demand for commodities in the fastest-growing major economy.

The kiwi fell to 74.47 US cents from 75.22 cents at the start of the day and from 75.71 cents in Wellington on Friday. the trade-weighted index fell to 78.61 from 79.39 on Friday.

China's exports declined 14.6 percent in March from a year ago, according to government figures, against expectations of a 12 percent increase, while imports fell 12.3 percent, beating the forecast 11.7 percent drop. The figures stoked concern about demand in the biggest market for products such as milk powder and the Australian dollar also dived as traders pondered the impact on shipments of iron ore and coal. The data comes ahead of the latest GlobalDairyTrade auction this week, which is expected to show another decline in prices.

"A poor number for the Chinese economy has a direct onset to commodity currencies and the consumption of commodities in China," said Alex Hill, head of corporate FX at NZForex. He said the sell-off may be limited because investors are more focussed on US data due this week for clues on interest rate movements in the world's biggest economy.

The US will publish March data for retail sales, industrial production, housing starts and inflation this week while the European Central Bank releases its latest policy decision on Wednesday. Australia has business and consumer confidence surveys this week, alongside inflation expectations and March employment data.

The kiwi may trade between 73.85 US cents and 77 cents this week, according to a BusinessDesk survey of 13 currency advisers and strategists. Seven expect the currency to decline, two bet it will rise, while four say it will remain little changed.

The GDT auction this Thursday may yield weaker prices as Fonterra Cooperative Group offers more product volume amid weaker demand, with whole milk powder futures suggesting a 5 percent decline for the current contract. Fonterra, the world's largest dairy exporter, last week said it would offer 9.5 percent more whole milk powder at this week's auction over contracts for delivery between June and October.

The kiwi traded at 70.39 euro cents, retreating from a record high 71.20 cents over the weekend and down from 70.89 cents on Friday. It traded at 98.23 Australian cents from 98.32 cents on Friday and fell to 89.81 yen from 91.23 yen. The kiwi fell to 51.05 British pence from 51.44 pence on Friday.