Sharechat Logo

NZ dollar extends gain against Aussie; Trump slump weighs on Asia

Wednesday 22nd March 2017

Text too small?

 The  New Zealand dollar gained against the Australian dollar as the interest rate differential between the countries looks set to persist and as investors were unnerved by the US White House's inability to deliver on its plans. 

The kiwi traded at 91.78 Australian cents as at 5pm in Wellington, versus 91.40 Australian cents as at 8am and 91.37 cents yesterday.  It was at 70.30 US cents from 70.47 cents yesterday. 

Stocks across Asia fell, following Wall Street's lead, as optimism about US President Donald Trump's ability to overhaul tax policy waned. Trump's expansionary fiscal plans at the same time the Federal Reserve looks hikes interest rates have been driving support for the greenback in recent months. 

"We had a slightly risk off scenario overnight with the equity markets falling and that's followed through in Asia as markets become a little bit nervous around the ability of the Trump administration to deliver its policies," said OMF private client advisor Stuart Ive. "We don't know what the outcome of all things Trump is going to entail." 

Among other things, it looks like his bid to amend the Affordable Healthcare Act, known as Obamacare, freeing up funds for the White House to embark on tax reform may be "somewhat floundering," said Ive. 

Meanwhile, the kiwi continued to outperform against the Aussie after the RBA signalled its "pretty much on the fence" at 1.5 percent as they try and balance their economy, between the over-heated housing market, high debt levels and low inflation, said Ive. "It looks like they are going nowhere fast." With New Zealand's Reserve Bank expected to keep the official cash rate at 1.75 percent when it reviews policy tomorrow, that means the rate differential will stay in the kiwi's favour.  

The better-than-expected overnight milk auction may have also helped support the local currency. Whole milk powder prices rose 2.9 percent to US$2,855 a tonne at the GlobalDairyTrade auction. Analysts had been expecting a decline based on pricing in the futures market. 

Ive said barring any Trump-related news in the next 12 hours, investors will be focused on the Reserve Bank's rate decision and statement tomorrow, which is expected to reiterate that monetary policy will remain accommodative. 

The kiwi fell to 78.48 yen from 79.45 yen yesterday and dropped to 4.8394 Chinese yuan from 4.8673 yuan. It declined to 65.11 euro cents from 65.51 cents and decreased to 56.36 British pence from 56.98 pence. The trade-weighted index was at 76.25 from 76.46 yesterday. 

The two-year swap rate rose 1 basis point to 2.28 while the 10-year swaps fell 4 basis point to 3.41 percent.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Steel & Tube Fy20 Trading Update
Further Contract Win Strengthens Scott Technology’s Position In Mining Sector
China’s Assertiveness Is Becoming a Problem for Its Friends, Too
New Talisman - Chairman’s Address to AGM 2020 August 6, 2020
T&G reports its 2020 Interim Results
Gold price hits $2,000 for first time on Covid
TruScreen strengthens its market presence in central and eastern Europe
Refining NZ announces non-cash impairment
Ryman Healthcare COVID-19 update Victoria
Talisman Quarterly Activities Report to 30 June 2020

IRG See IRG research reports