NZ dollar benefiting from weaker greenback as markets fret about global growth

Monday 10th December 2018

The New Zealand dollar was higher as the greenback continues to bear the brunt of rising risk aversion amid concern about global growth.

The kiwi traded at 68.90 US cent at 5pm in Wellington from 68.49 US at 8am and 68.66 cents on Friday in New York. The trade-weighted index was at 75.13 from 74.92 last week.

The US dollar came under further pressure as China on Sunday called on the US to withdraw the arrest warrant on Huawei global chief financial officer Meng Wanzhou, who faces extradition to the U.S. According to the Guardian, China has warned Canada there would be severe consequences if it did not immediately release Meng, calling the case “extremely nasty”.

The greenback was already weighed by increasing speculation that the US Federal Reserve may be nearing the end of its tightening cycle, in particular as data undershoots expectations.

There has been "a bit of doom and gloom" and the Meng case "could certainly trip up the trade talks," said Martin Rudings, senior foreign exchange dealer at OMF. He also noted the US has now imposed a hard deadline for a resolution to the trade stoush with U.S. Trade Representative Robert Lighthizer, saying negotiations need to reach a successful end by March 1 or new tariffs will be imposed.

"Markets are very pessimistic going into next year," said Rudings. He said the kiwi is holding up well considering the risk aversion.

Kiwibank chief economist Jarrod Kerr also said the New Zealand dollar's support is "coming from a weaker USD which is under the shadow of any resolution to the ongoing trade disputes, increasingly dovish Fed language, and slowing global growth…that set of factors has created a wall of worry offshore while the NZD looks relatively stable/robust."

The kiwi traded at 95.46 Ausralian cents from 95.48 cents last week.

The local currency was at 54.06 British pence from 53.96 pence last week in the run-up to the UK parliament's Brexit vote on Tuesday. It trade at 60.26 euro cents from 60.37 cents last week.

The kiwi was at 77.40 yen from 77.45 yen last week and was at 4.7453 Chinese yuan from 4.7220 yuan.

New Zealand's two-year swap rate was unchanged at 2.04 percent; the 10-year swaps eased 2 basis point to 2.75 percent

(BusinessDesk)

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