Friday 6th April 2018
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The New Zealand dollar dropped after US President Donald Trump called for US$100 billion of additional tariffs on Chinese goods, ratcheting up concerns about a global trade war and triggering a spike in risk aversion among investors.
The kiwi fell to 72.59 US cents as at 12.18pm in Wellington from 72.70 cents immediately before the announcement.
Tensions have been high, stoking increased volatility in financial markets as investors react to every piece of news. Overnight, comments from White House trade adviser Peter Navarro that US officials would meet their Chinese counterparts before any new tariffs were imposed cooled fears, although China's complaint to the World Trade Organisation over the trade barriers and Trump's comments reignited concerns.
“In light of China’s unfair retaliation, I have instructed the USTR (US Trade Representative) to consider whether US$100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs,” Trump said in a statement issued by the White House, Bloomberg reported.
The USTR responded by saying “President Trump is proposing an appropriate response to China’s recent threat of new tariffs. After a detailed investigation, USTR found overwhelming evidence that China’s unreasonable actions are harming the US economy," it said in a statement on its website.
Martin Rudings, a senior dealer at OMF, said the kiwi fell on the headline as it looks like the tariffs will be "more wide-reaching." He noted this is a "bit of political posturing before they sit down at the table" and things could reverse before the end of the session as market attention shifts to US jobs data later in the global trading day.
The kiwi fared better than the Australian dollar, paring some of its overnight losses on that cross rate. The local currency traded at 94.71 Australian cents versus 94.58 cents at 8am and 94.77 cents yesterday. "The Aussie dollar stands out as the currency that's likely to lose the most with actual sanctions, so it's taken a bit of a battering," said Rudings.
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