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NZ dollar gains capped as Trump keeps pressure on China for trade deal

Friday 14th September 2018

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The New Zealand dollar's gains were capped overnight as US President Donald Trump talked down reports he was seeking to settle a trade dispute with China and said the Asian nation remained "under pressure" to reach a deal. 

The kiwi rose as high as 65.89 US cents, trading at 65.69 cents at 8am in Wellington from 65.53 cents yesterday. The trade-weighted index edged up to 71.29 from 71.18 yesterday. 

Stock markets rallied on a Wall Street Journal report that US Treasury Secretary Steven Mnuchin invited his Chinese counterparts back to the table in an effort to find common ground on trade. The dispute between the world's two biggest economies has seen them impose increasingly punitive tariffs and non-tariff barriers on each other's goods and services, and heightened volatility in financial markets. Trump talked down the WSJ report that the White House was under pressure to reach a deal, saying on Twitter the Chinese are "under pressure to do a deal with us". 

Weaker than expected US inflation figures had weighed on the greenback before Trump's tweet. Meanwhile, Turkey's central bank increased its benchmark interest rate by 625 basis points to 24 percent, helping to soothe investors' fears over emerging economies. 

"After rising as high as US$0.6590 after the US CPI release, Trump’s subsequent intervention of Twitter saw the NZD fall back from the highs of the day," Bank of New Zealand interest rate strategist Nick Smyth said in a note. 

Local data today include the BusinessNZ performance of manufacturing index, which has been showing a slowing pace of growth for New Zealand industrial production. Official data this week showed New Zealand manufacturing sales shrank in the second quarter, although that was affected by outages at two major energy producers. 

Chinese retail sales and industrial production data will also attract attention today. The kiwi rose to 4.4937 Chinese yuan from 4.4868 yuan yesterday. 

The local currency increased to 91.34 Australian cents from 91.15 cents, recovering most of yesterday's decline on data showing robust jobs growth across the Tasman. 

The kiwi slipped to 56.18 euro cents from 56.33 cents yesterday after European Central Bank president Mario Draghi confirmed plans to shrink its quantitative easing programme from next month. It traded at 50.10 British pence from 50.23 pence when the Bank of England kept its key rate unchanged. The kiwi rose to 73.56 yen from 73.03 yen. 

(BusinessDesk)

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