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NZD weaker against USD, weighed down by weaker Aussie

Friday 22nd February 2019

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The New Zealand dollar fared better against the Aussie but lost ground against the US dollar after Westpac Bank said it now expects the Reserve Bank of Australia to cut rates twice this year.

The kiwi was at 68.02 US cents at 745am in Wellington versus 68.48 cents late yesterday.  It was at 96.10 Australian cents from 95.54 Australian cents.  

"NZD was caught up in a wild AUD session. Kiwi remains vulnerable to offshore headlines. Further volatility is possible," said ANZ senior economist Liz Kendall.  The Australian dollar was trading at 70.77 US cents versus 71.63 US cents late yesterday.

The Aussie took a tumble when Westpac Bank said it expects the RBA to cut the cash rate by 25 basis points in August and then in November, bringing it to 1.0 percent.  The bank also revised down its GDP growth forecasts for 2019 and 2020 from 2.6 percent to 2.2 percent. 

Kendall said, however, trading in the Aussie was turbulent as it was boosted by strong employment, fell on the Westpac announcement, saw some gains on positive China-US trade headlines but then sank on news that China's Dalian port will ban coal imports. 

Customs at China’s northern port of Dalian has banned imports of Australian coal and will cap overall coal imports from all sources to the end of 2019 at 12 million tonnes, an official at Dalian Port Group told Reuters. 

On trade, China is reported to have offered to buy an extra US$30 billion a year in agricultural products. Kendall said, however, it would have little direct implications for New Zealand, since it would consist in soybeans, corn and wheat, commodities New Zealand doesn't export. 

She said that RBA governor Philip Lowe's semi-annual testimony to the House of Representatives' Standing Committee on Economics today will be closely watched, in particular after the RBA switched to a neutral stance, essentially putting rate cuts back on the table. 

The New Zealand dollar was trading at 52.19 British pence from 52.48 pence and at 60.04 euro cents from 60.33. It was at 75.35 yen from 75.86 yen and at 4.5719 Chinese yuan from 4.5864 Chinese yuan. 

The trade-weighed index was at 73.76 from 73.98.


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