NZ dollar near 2 1/2-year low as US wages creep higher, Trump poised to impose new tariffs

Monday 10th September 2018

The New Zealand dollar held near a two-and-a-half year low as unexpectedly strong US wage growth spurred demand for the greenback and President Donald Trump's Chinese tariff plans kept investors uneasy.

The kiwi traded at 65.30 US cents as at 8am in Wellington from 65.33 cents on Friday in New York and down from 65.71 cents in Asia last week. The trade-weighted index was at 71.21 from 71.23 last week.

The US dollar index followed US Treasury yields higher after non-farm payrolls data showed average hourly earnings in August were 2.9 percent higher than a year earlier, more than economists forecast. That heightened expectations the Federal Reserve will raise the federal funds rate this month.

Meanwhile, Trump kept investors nervous about his trade plans. He said he could impose tariffs on an additional US$200 billion of Chinese imports "very soon" and that there's a further US$267 billion of imports "ready to go on short notice if I want". The trade war between the US and China has weighed on the Australian and New Zealand dollars, with the antipodean nations reliant on exporting to China.

"The NZD is likely to start this week in a similar vein to how it finished the last: on the back foot," ANZ Bank New Zealand economists Liz Kendall and Philip Borkin said in a note. "While the market is still digesting the implications of the strong US wage growth numbers, the main focus is likely to be trade as rhetoric ramps up further."

Local data today include June quarter manufacturing figures, which will feed into economists' forecasts for gross domestic product.

The kiwi traded at 56.53 euro cents from 56.48 cents last week and 50.48 British pence from 50.45 pence. On Friday the UK parliament released a transcript from European Union chief negotiator Michel Barnier saying the regional bloc was open to a different plan for the Northern Ireland border.

The local currency was unchanged at 73.42 yen from the New York close and little changed at 4.4678 Chinese yuan from 4.4664 yuan. It edged up to 91.87 Australian cents from 91.71 cents last week.

(BusinessDesk)

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