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NZ dollar steady as US stirs EU trade tensions

Wednesday 3rd July 2019

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The New Zealand dollar largely held its gains as the greenback faced headwinds after the US threatened to impose more tariffs on European goods. 

The kiwi was trading at 66.67 US cents at 8am in Wellington from 66.75 US cents at 5pm yesterday. The trade-weighted index was at 72.85 from 72.94.

Markets were jittery after the US threatened US$4 billion in tariffs on EU goods, including a variety of dairy products, olives, and Scotch whiskies. The additional tariffs are linked to a dispute against the EU and certain members states regarding EU subsidies on large civil aircraft, according to the Office of the US Trade Representative. 

The bloc said it remained open to negotiations “provided these are without preconditions and aim at a fair outcome”, Reuters reported, but it added that it was also preparing to retaliate as soon as the WTO arbitrator had ruled on its rights to do so.

ANZ Bank FX/rates strategist Sandeep Parekh said that the kiwi benefited from US dollar weakness on the heightened trade concerns and "a slightly softer GDT auction failed to dent the kiwi's prospects against the backdrop of a broadly weaker USD." 

The index for dairy product prices fell at the Global Dairy Trade auction, declining a fourth consecutive time, as whole milk powder prices continued their fall. The GDT price index slipped 0.4 percent from the previous auction two weeks ago. The average price was US$3,302 a tonne, compared with US$3,208 a tonne two weeks ago. Whole milk powder fell to US$2,969 from US$3,006. 

The kiwi was also slightly weaker against the Aussie after the Reserve Bank of Australia cut rates by 25 basis points to 1 percent but the RBA "was relatively less dovish than the market had expected it to be, but remains poised to ease policy further should it be required," said Parekh. 

The kiwi was trading at 95.41 Australian cents from 95.56 cents. It was at 52.91 British pence from 52.81 and at 59.21 euro cents from 59.10 cents. European leaders have agreed to nominate International Monetary Fund Managing Director Christine Lagarde to become the next president of the European Central Bank when Mario Draghi's term ends on Oct. 31. 

 The kiwi traded at 71.91 yen from 72.33 and at 4.5800 Chinese yuan from 4.5803.


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