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NZ dollar gains with global risk sentiment, helped by positive economic data

Tuesday 5th June 2018

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The New Zealand dollar gained as stronger economic data in the US and the UK and fading concerns about Italy's political crisis helped lift risk sentiment.

The kiwi traded at 70.25 US cents as at 8:30am in Wellington from 69.81 cents late yesterday. The trade-weighted index was at 73.55 from 73.57 yesterday.

While New Zealand markets were closed for the Queen's Birthday holiday yesterday, offshore markets continued to trade. The UK Markit manufacturing and construction PMIs for May both printed stronger than expected, as did the May ISM manufacturing survey in the US and Australian retail sales for April. Financial markets were also buoyed by US nonfarm payrolls on Friday, which showed the world's biggest economy added 223,000 jobs in May, more than expected, while the jobless rate fell to 3.8 percent from 3.9 percent. Traders also appeared to shrug off concerns about increased trade tensions.

"Against that positive macroeconomic backdrop, risk sentiment is positive, with equity markets higher and bond rates higher, ignoring the negative trade-talk developments since the weekend," said Jason Wong, a currency strategist at Bank of New Zealand, in a note. "As long as US trade tensions don’t completely blow up this weekend, we should be able to hold onto those gains."

Leaders of the Group of Seven nations are scheduled to meet this coming weekend. G-7 finance ministers expressed their disappointment at US tariffs on steel and aluminium when they met over the past weekend.

Today, traders will be watching for Australia's balance of payments data and the Reserve Bank of Australia's interest rate review, which is expected to show no change. Tonight, the latest Global Dairy Trade auction is due, which will give the market any early indicator of whether Fonterra Cooperative Group was right to lift its forecast farmgate milk payout.

The kiwi dollar fell to 91.81 Australian cents from 92.08 cents late yesterday. It rose to 52.77 British pence from 52.21 pence and gained to 60.09 euro cents from 59.78 cents. The kiwi jumped to 77.17 yen from 76.33 yen as risk sentiment improved and traded at 4.4995 yuan from 4.4721 yuan.


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