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NZ dollar edges lower as Trump's tariff threat saps risk appetite, Fed sticks to plan

Thursday 2nd August 2018

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The New Zealand dollar edged lower as speculation US President Donald Trump will impose even bigger tariffs on Chinese imports sapped investors' appetite for riskier assets, while the Federal Reserve retained its fairly upbeat economic outlook.

The kiwi traded at 67.86 US cents as at 8am in Wellington from 67.91 cents yesterday. The trade-weighted index was at 73.02 from 73.07. 

Stocks on Wall Street fell, carrying on the downbeat tone set when reports emerged that the White House was considering a 25 percent tariff on Chinese imports as opposed to a 10 percent barrier. The US administration will provide an update later today. Meanwhile, the Federal Open Market Committee affirmed its outlook for gradual interest rate hikes, saying economic activity was rising at a "strong" rate. The yield on US 10-year Treasuries rose 3 basis points to almost 3 percent. 

"While there were a few things going on overnight (including a ‘steady as she goes’ FOMC statement), the kiwi was pressured lower by ongoing tensions regarding the global trade backdrop and some softer PMIs," ANZ Bank New Zealand economists Liz Kendall and Philip Borkin said in a note. "However, moves were contained to recent ranges, and we suspect that will remain the case again today."

ANZ said the kiwi has support at 67.20 US cents and faces resistance at 68.60 cents. 

No local data is scheduled for today, although the New Zealand Debt Management Office is expected to sell $100 million of 2040 inflation bonds. 

Australian trade figures for June are forecast to show a wider trade surplus across the Tasman. The kiwi traded at 91.72 Australian cents from 91.61 cents yesterday. 

The Bank of England rounds out the major central bank reviews this week and widely expected to increase its benchmark rate, while acknowledging risks to the UK economy in the form of Brexit. The kiwi traded at 51.70 British pence from 51.82 pence yesterday and was at 58.18 euro cents from 58.15 cents. 

The local currency fell to 75.72 yen from 76.01 yen yesterday as Japan's currency recovered from an earlier sell-off when the Bank of Japan didn't amend its yield curve controls as much as anticipated. 

The kiwi slipped to 4.6242 Chinese yuan from 4.6298 yuan yesterday. 


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