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NZ dollar hits 4-month high as Trump announces US tariffs, raising spectre of protectionism

Wednesday 24th January 2018

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The New Zealand dollar rose to a four-month high as US President Donald Trump raised tariffs on imports of washing machines and solar panels, raising fears about the White House's protectionist attitude. 

The kiwi dollar climbed as high as 73.64 US cents and traded at 73.43 cents at 8am in Wellington from 73.22 cents yesterday. The trade-weighted index gained to 75.39 from 75.21 yesterday. 

The Dollar Index, a measure of the greenback against a basket of currencies, fell 0.2 percent after US Trade Representative Robert Lighthizer announced plans to impose a new 30 percent tariff on imported solar panels and tariffs of up to 50 percent on residential washing machines. The announcement comes as the US, Mexico and Canada prepare for the latest round of renegotiations on the North American Free Trade Agreement. Trump has advocated tilting trade relationships in favour of the US, raising fears a growing tide of protectionist policies could weigh on global trade. 

"While Trump had pledged to get tough with America’s trade competitors during the election campaign, the move yesterday was the first time he had directly signed off on increased tariffs in his time in office," Bank of New Zealand interest rate strategist Nick Smythe said in a note. "The USD is generally weaker again, with Trump’s imposition of tariffs seemingly the latest excuse to sell the dollar." 

Still, equity markets were largely unfazed by the tariff announcement with stocks on Wall Street gaining on the strength of corporate earnings, while commodity prices gained with Brent crude oil up 1.3 percent to US$69.90 a barrel. 

Local data today include credit card spending and balances for December. 

The kiwi was little changed at 81.04 yen from 81.10 yen yesterday after Japan's currency rallied on a shift in the Bank of Japan's language on inflation expectations, which it viewed as stable rather than falling. 

The local currency rose to 91.90 Australian cents from 91.66 cents yesterday and gained to 4.6995 Chinese yuan from 4.6842 yuan. It increased to 52.51 British pence from 52.36 pence yesterday and traded at 59.79 euro cents from 59.73 cents. 

(BusinessDesk)

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