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NZ dollar falls as trade stoush fears remain elevated; business confidence, RBNZ loom

Wednesday 27th June 2018

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The New Zealand dollar fell as US President Donald Trump hit back at European criticism of his trade protectionism, firmly keeping the global stoush at top of mind for investors.

The kiwi declined to 68.50 US cents as at 8am in Wellington from 68.92 cents yesterday, while the trade-weighted index decreased to 73.07 from 73.30.

Investors remain fixated on the tit-for-tat trade rhetoric by global leaders, with the greenback, commodity prices and US equities all gaining. Trump rebuked American motorcycle maker Harley Davidson's plan to move production overseas and hinted the European Union's car makers may face new tariffs once a study on that industry is completed. 

"Trade war headlines are still in focus but the market isn’t in a mood to keep on pricing in bad news at this stage," Bank of New Zealand senior market strategist Jason Wong said in a note. "The NZD is weaker on all the crosses, although falls have been modest."

Local data today include May overseas merchandise trade and the ANZ business outlook, which will be watched for signs of ongoing pessimism among the domestic business community.

That's ahead of the Reserve Bank's policy review tomorrow, which is expected to keep the official cash rate at 1.75 percent.

Wong said the RBNZ's statement of intent also mentioned the kiwi dollar remained elevated, something he said was "complete nonsense, with NZ’s real exchange rate in line with its average of the past 15 years and below its average of the past five years but old habits seem hard to break."

The local currency declined to 92.72 Australian cents from 92.96 cents yesterday and fell to 4.5051 Chinese yuan from 4.5174 yuan. It traded at 58.85 euro cents from 58.83 cents yesterday and was little changed at 51.82 British pence from 51.87 pence. The kiwi traded at 75.42 yen from 75.45 yen yesterday.


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