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NZ dollar holds above US69c as Trump upbeat on trade talks

Friday 1st February 2019

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The New Zealand dollar held above 69 US cents as US President Donald Trump's optimism on the prospects for reaching a trade deal with China helped soothe fears over global growth. 

The kiwi traded at 69.04 US cents as at 8am in Wellington from 69.15 cents yesterday. The trade-weighted index was at 74.19 from 74.24. 

Trump tweeted that trade negotiations between US and Chinese officials are going well, although no deal will be reached until he meets with Chinese President Xi Jinping. Tensions between the world's two biggest economies have threatened to sap global growth at a time when China's economy is already slowing. 

The local currency climbed to a six-week high after the Federal Reserve yesterday said it will be patient when it comes to any future interest rate hikes. The lower rate track supported a rally in equity markets around the world and weighed on the greenback, although the 2.63 percent yield on US 10-year Treasuries is still 35 basis points higher than its New Zealand counterpart. 

"Risk currencies continued to drift north overnight but gains were pared," ANZ Bank New Zealand economists Sharon Zollner and Miles Workman said in a note. "The focus now turns to US-China talks, where a trade deal could give risk another leg up." 

They said the New Zealand dollar has support at 68.70 US cents and faces resistance at 69.60 cents. 

The kiwi also got a boost from Standard & Poor's lifting its outlook on the New Zealand sovereign rating to 'positive'. Local data today include the ANZ-Roy Morgan consumer confidence survey and the December quarter household prices index. 

Nick Smyth, an interest rate strategist at Bank of New Zealand, said it was unclear how the Fed's new stance would affect the Reserve Bank. 

"While a potential further rise in the NZD would complicate the RBNZ’s task of getting core inflation up to the 2 percent mid-point, a more dovish Fed should reduce some of the downside risks to US (and global) growth and markets," Smyth said in a note. "We continue to think OCR cuts are unlikely."

The kiwi traded at 95.07 Australian cents, from 95.13 cents yesterday, and dipped to 4.6221 Chinese yuan from 4.6339 yuan. The local currency decreased to 75.16 yen from 75.28 yen yesterday and traded at 52.69 British pence from 52.65 pence. It rose to 60.33 euro cents from 60.11 cents.


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