Friday 22nd February 2019
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The New Zealand dollar fell, dragged down by the Australian dollar, amid concerns about what a ban on Australian coal imports through China's northern ports in Dalian might mean.
Both currencies steadied after Australian Prime Minister Scott Morrison, who is visiting New Zealand, said the Chinese move doesn’t point to a souring of ties between Australia and China.
The kiwi was trading at 67.74 US cents at 5 pm, from 68.02 at 7.45am. The trade-weighted index was at 73.44 from 73.76.
The local currency is now 0.89 US cents lower than its 68.63 cent finish in New York last Friday. The risk of fruit fly discoveries in Auckland hurting horticulture and concerns about the state of the Australian economy are factors in the decline.
Reuters reported that five harbours overseen by Dalian customs, Dalian, Bayuquan, Panjin, Dandong and Beiliang, would no longer allow Australian coal to be cleared.
“It’s a bit hard to know whether it’s meaningful or not. Apparently, they do this all the time at various ports,” says Rankin Treasury Advisory principle Derek Rankin.
“People should be careful about leaping to conclusions about this," Morrison told journalists in Auckland. "This is not the first time that, on occasion, local ports make decisions about these matters.
“There is no evidence before me or us that would suggest it has the connotations that it has anything to do with anything more broadly than that.”
Reserve Bank of Australia governor Philip Lowe chimed in by saying the amount of coal involved was relatively small and not enough to derail the Australian economy.
As with New Zealand, China is Australia’s largest trading partner and coal is its largest export there.
Plenty of conclusions are being drawn, including that China is making Australia the scapegoat for its trade dispute with the United States.
The problem with that theory is the growing optimism that China and the US are on the way to resolving their differences.
Another theory is that China is retaliating for Australia last year banning telecommunications company Huawei from supplying equipment to the country's 5G broadband network.
For the moment at least, New Zealand has a similar ban against Huawei from partnering with local company Spark. Recently there was similar speculation of retaliation when fishing company Sanford reported running into trouble exporting into China.
At a joint press conference today, both Morrison and New Zealand Prime Minister Jacinda Ardern downplayed suggestions their involvement in the "Five Eyes" intelligence alliance is affecting trade relations. They emphasised the importance of both countries' relationship with China.
The New Zealand dollar is trading at 95.48 Australian cents from 96.10, at 51.96 British pence from 52.19, at 59.74 euro cents from 60.04, at 75.02 yen from 75.35 and at 4.5573 Chinese yuan from 4.5719.
The two-year swap rate is at 1.8507 percent from 1.8750 yesterday; the 10-year swap rate is at 2.4500 percent from 2.8750.
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