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NZ dollar benefits from USD weakness after Trump complains about rate rises

Tuesday 21st August 2018

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The New Zealand dollar gained as the greenback continued to be weighed down in Asian trading by complaints US President Donald Trump made about US interest rate rises. 

The kiwi traded at 66.66 US cents at 5pm from 66.37 US cents at 8am in Wellington and from 66.22 cents yesterday. The trade-weighted index was at 71.97 from 71.79 yesterday.

The US dollar fell after Trump told Reuters he was “not thrilled” with the Federal Reserve for raising interest rates. The Fed has raised interest rates twice this year and is expected to do so again next month as consumer price inflation continues to move higher. Trump also accused China of manipulating its currency to make up for the US-imposed tariffs.

"A lot of currencies were looking very oversold against the US and as one breaks a level then others follow suit," said ANZ Bank New Zealand senior macro strategist Phil Borkin. He said, however, the weakness in the greenback may be fleeting. 

"The US administration clearly wants a lower currency, but whether they can actually achieve that is another thing... one of the reasons the US dollar is strong is that the US economy has been outperforming and until that changes, it is unlikely to fall much," said Borkin. 

The Australian dollar was largely unmoved after the Reserve Bank of Australia continued to indicate the next move in interest rates is likely to be up - in contrast with New Zealand’s central bank that has indicated a cut is possible. The kiwi traded at 90.56 Australian cents from 90.60 cents yesterday. Borkin said attention had been distracted by political ructions as Australia's Prime Minister Malcolm Turnbull survived a leadership challenge.

Central banks, however, will remain in focus as traders await minutes from the Federal Reserve and as central bankers converge at Jackson Hole, Wyoming, this week at the annual conference. 

The kiwi could rally to 67 US cents in the short term as "the US calendar features FOMC minutes plus the Jackson Hole symposium, both of which could ruffle the USD," said Imre Speizer, head of NZ strategy at Westpac Banking Corp. He said, however, he expects the downward trend to resume and is still tipping it to reach 64 US cents by year-end. 

The kiwi rose to 4.5590 Chinese yuan from 4.5344 yuan yesterday and traded at 73.33 yen from 73.26 yen. It traded at 57.79 euro cents from 57.95 cents yesterday and was little changed at 51.94 British pence from 51.95 pence.

New Zealand's two-year swap rate eased two basis points to 2.01 while the 10-year swap rate eased 1 basis point to 2.85 percent.


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