NZ dollar rises from four-month low as Trump agrees to put off axing Nafta

The New Zealand dollar rose from a four-month low after US President Donald Trump agreed not to terminate the North American Free Trade Agreement just yet, giving investors some relief that the world's biggest economy is adamant in raising trade barriers. 

The kiwi rose to 69.10 US cents as at 5pm in Wellington from 68.68 cents earlier today to be little changed from 69.26 cents yesterday. The trade-weighted index was unchanged at 75.05. 

Trump told his Mexican and Canadian counterparts he won't immediately kill Nafta after earlier reports citing an unnamed White House official indicated he planned to sign an executive order ending the deal as early as this week. The North American nations will instead seek to renegotiate the trade and investment deal, which Trump has blamed for hollowing out US manufacturing. His administration's anti-trade rhetoric, which has included the imposition of new tariffs on Canadian lumber this week, has weighed on commodity-linked currencies whose nations rely on export industries including the New Zealand, Australian and Canadian dollars. 

"The kiwi's come back a bit today on the news that Trump has decided not to kill Nafta straight away," said Graham Parlane, private client manager at OMF. "The worries over the trade theme, the diminishing yield advantage generally, the contraction of credit in New Zealand, the housing market pulling back to a more normal pace, immigration heading into the election, these all for me are factors that are likely to weigh to I'm biased to the downside in the near term."

The kiwi rose to 13.1026 Mexican pesos from 13.0666 pesos yesterday and slipped to 93.60Canadian cents from 93.92 cents yesterday.

New Zealand's two-year swap rate was unchanged at 2.31 percent and 10-year swaps were also unchanged at 3.38 percent. 

Imre Speizer, senior market strategist at Westpac Banking Corp, said Trump's underwhelming tax plan pushed yields on US Treasuries lower overnight and that the next big thing on investors' radars was the deadline to lift the debt ceiling at the end of the week to avoid a Federal government shutdown. 

"If they can't get that through then I think we'll see a big slide in rates" with the end of the "Trumpflation" trade that's been in place since November, he said. 

New Zealand Finance Minister Steven Joyce today announced plans to cut the government's net debt target to between 10-and15 percent of gross domestic product by 2025 and boosted planned infrastructure spending over the next four years. Joyce will unveil his first budget next month and left the door open for tax adjustments. 

The local currency rose to 92.32 Australian cents from 92.06 cents yesterday. The kiwi fell to 4.7651 Chinese yuan from 4.7674 yuan yesterday and declined to 76.87 yen from 77.05 yen. It edged up to 63.37 euro cents from 63.28 cents yesterday and declined to 53.70 British pence from 53.94 pence.

(BusinessDesk)