Bad news in China seems to be good news for the currencies of Australia and New Zealand.

Both currencies extended gains after China's consumer prices rose at the slowest pace in more than five years in January, fueling speculation for expanded stimulus in the biggest trading partner of both countries. The release came after data this month showed imports to the world's second-largest economy declined and manufacturing gauges fell into contraction.

The Australian dollar "strengthened as heightened expectation for further monetary easing" from the People's Bank of China drove up shares in Shanghai, JPMorgan Chase Bank analysts wrote in a note to clients.

The New Zealand dollar rose 1.4 percent against its peers over the past week, the strongest performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Australia's currency was the third-strongest with a 0.8 percent advance.

The Consumer Price Index in China rose 0.8 percent year-on-year, compared with the median projection for a 1 percent increase in a survey of analysts by Bloomberg News.

"Over the near term, at least we expect their outperformance to continue, unless we have a knock in key commodities prices," Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd, said of the Australian and New Zealand currencies.

- Bloomberg