Tuesday 28th August 2018
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The New Zealand dollar was higher against the greenback as risk appetite was buoyed by news the US and Mexico had agreed to a trade deal, with Canada set to rejoin the talks later in the global trading day.
The kiwi traded at 67 US cents at 8am in Wellington from 66.87 US cents at 5pm in Wellington. The trade-weighted index was unchanged at 72.20.
Global risk appetite got a lift when the US and Mexico reached a trade agreement that will replace a soon-to-be-terminated NAFTA bill, according to both presidents in a joint announcement. At this stage, public details are still scant and Canada has still not been made privy to the deal. Talks between the US and Canada are expected to start Tuesday (US time) with Foreign Affairs Minister Chrystia Freeland travelling to Washington.
However, both the New Zealand dollar and the Australian dollar "were somewhat reluctant participants in this risk rally," said Philip Borkin, senior macro strategist for ANZ Bank. According to Borkin, there is likely one reason: China.
"Both NZ and Australia are far more leveraged to that story and while the PBoC is perhaps taking a more conciliatory tone here, visible progress on trade between the US and China is yet to be seen," he said.
Borkin expects the kiwi to remain subdued and said it has support around 66.30 US cents and resistance at 67.10 US cents.
The kiwi traded at 91.09 Australian cents from 91.32 Australian cents late yesterday. It was at 4.5650 Chinese yuan from 4.5558 Chinese yuan and traded at 74.41 yen from 74.31 yen. It was at 57.33 euro cents from 57.55 and at 51.95 British pence from 52.03 pence.
Investors will be digesting a speech from Prime Minister Jacinda Ardern this morning, aimed at the business sector. However, the key risk for the kiwi this week is the ANZ Business Confidence survey later in the week given the concerns around waning business confidence.
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