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NZ dollar starts week on backfoot on fears Trump will impose new China tariffs

Monday 17th September 2018

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The New Zealand dollar started the week on the backfoot after reports that US President Donald Trump will proceed with tougher trade barriers on Chinese products bolstered demand for the greenback. 

The kiwi traded at 65.50 US cents at 8am in Wellington, from 65.46 cents on Friday in New York and down from 65.85 cents last week in Asia. The trade-weighted index was at 71.31 from 71.24 last week. 

The US dollar index gained 0.5 percent after US media reported on Friday that Trump will go ahead with plans to impose US$200 billion of tariffs on Chinese imports at a lower rate of 10 percent. Bloomberg reported that Trump wasn't concerned about putting the tariffs in place ahead of trade talks with Asia's biggest economy and that Chinese officials may decline the invitation. The tensions between the US and China are keenly felt in Australia and New Zealand, which both count China as their biggest trading partner. 

"While US inflation indicators in the past week have surprised on the downside, the rumoured wide-ranging 10 percent tariffs will give US consumer inflation quite the boost, as they would cover half of all imports from China," ANZ Bank New Zealand economists Sharon Zollner and Philip Borkin said in a note. "Ever-present trade concerns should keep the NZD capped. In fact, until we see clear evidence to the contrary, it remains a ‘sell-on-rallies’ currency."

Local data today include the BNZ-BusinessNZ performance of services index, which has shown activity across two-thirds of the economy has been expanding since July 2010. The June quarter balance of payments and gross domestic product will be closely watched later this week. 

The kiwi traded at 91.48 Australian cents from 91.43 cents and gained to 4.5008 Chinese yuan from 4.4912 yuan last week. It edged up to 56.37 euro cents from 56.27 cents on Friday and traded at 50.10 British pence from 50.03 pence. The local currency increased to 73.39 yen from 73.27 yen last week. 


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