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NZD lifts as US-China return to negotiating table, US seeking stable yuan

Wednesday 20th February 2019

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The New Zealand dollar lifted as a new round of talks between the US and China kicked off in Washington and after headlines that the US is pressuring China to keep the yuan stable as part of a potential deal. 

The kiwi was trading at 68.82 US cents at 8am in Wellington versus 68.28 US cents at 5pm in Wellington. The trade-weighted index was at 74.49 from 74.17.

 A 90-day tariff truce between China and the US is set to end at the start of March. However, investors are fairly upbeat that the latest round of talks will lead to a resolution.  According to Bloomberg, the US is asking China to keep the value of the yuan stable as part of trade negotiations between the world’s two largest economies, a move aimed at neutralizing any effort by Beijing to devalue its currency to counter American tariffs.

"That was broadly viewed as a plus for countries with strong trade ties to China," said Kiwibank dealer Mike Shirley. 

The kiwi was also helped when dairy product prices moved higher at the overnight Global Dairy Trade auction, rising for the sixth straight time, though gains were less than expected. The GDT price index rose 0.9 percent from the previous auction two weeks ago. The average price was US$3,271 a tonne.

"This was a smaller lift than had been indicated by futures pricing, but nonetheless continues the winning streak that started in December, even as the Chinese economy slows," said ANZ senior economist Liz Kendall.  

Looking ahead, investors will be watching for the minutes from the US Federal Reserve's latest meeting.  "The minutes are expected to confirm a generalised absence of inflation pressures, global risks, and the proximity of the fed funds rate to neutrality," said Kendall. 

The New Zealand dollar was at 95.98 Australian cents from 95.99 Australian cents, at 52.72 British pence from 52.93, at 60.65 euro cents from 60.44, at 76.09 yen from 75.42 and at 4.6502 Chinese yuan from 4.6252.


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