NZ dollar higher against USD as jitters about China-US trade tensions recede

Wednesday 12th December 2018

The New Zealand dollar rose against US dollar on improving sentiment after US President Donald Trump seemed optimistic he could strike a trade deal with China and Canada released Huawei's chief financial officer Meng Wanzhou on bail.

The kiwi traded at 68.90 US cents at 5pm in Wellington from 68.70 US cents at 8am and from 68.81 cents late yesterday. The trade-weighted index was at 75.35 from 75.24.

On China trade, Trump told Reuters “we’ll probably have another meeting. And maybe a meeting of the top people on both sides. If it’s necessary, I’ll have another meeting with President Xi, who I like a lot and get along with very well.” He also said he would intervene in the Huawei case "if I thought it was necessary." Meng was arrested in Canada earlier this month at the behest of the US, sparking concerns the move could derail the trade talks between the two countries.

However, Meng will be released on C$10 million bail — with five guarantors — as she awaits possible extradition to the United States on fraud charges, Canada's CBC radio reported.

Tim Kelleher, head of institutional foreign exchange sales at ASB Bank said sentiment lifted on the news and also noted Trump said it would be "foolish" for the US Federal Reserve to lift rates next week. Kelleher said the US dollar eased back on the comments but he doesn't expect it to last given that a rate increase next week is fully priced in.

"Clearly they are going to raise rates next week," he said.

The kiwi remained strong against the British pound as Prime Minister Theresa May's leadership is under threat after she was forced to resume lobbying Europe for greater concessions on the Northern Ireland border. "She'll be gone by lunchtime tomorrow," he said. The kiwi traded at 55.09 from 54.70 pence yesterday.

Looking ahead, Kelleher said the biggest risk for the kiwi is that next week's third-quarter gross domestic product number is weak. "If you have a Fed rate hike early Thursday morning, followed by a disappointing GDP" the kiwi could fall sharply, in particular against the Australian dollar, he said.

The kiwi traded at 95.42 Australian cents from 95.45 cents yesterday and declined to 4.7436 Chinese yuan from 4.7473 yuan. It traded at 78.17 yen from 77.76 yen yesterday and rose to 60.83 euro cents from 60.52 cents.

New Zealand's two-year swap rate rose 2 basis points to 2.05 percent; the 10-year swaps was unchanged at 2.74 percent

(BusinessDesk)

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