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NZ dollar gains as investors await Trump's tariff announcement

Tuesday 18th September 2018

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The New Zealand dollar rose as investors wait for US President Donald Trump to announce his next tranche of tariffs on Chinese imports after Wall Street closes. 

The kiwi increased to 65.78 US cents as at 8am in Wellington from 65.54 cents yesterday. The trade-weighted index edged up to 71.46 from 71.34 yesterday. 

Stocks on Wall Street fell ahead of Trump's announcement, which is expected to impose a 10 percent tariff on US$200 billion of Chinese imports. Tariffs of up to 25 percent had been threatened.

With China a bigger exporter of goods to the US, the Asian economy is losing its ability to respond in kind with traditional trade barriers and investors are wary the world's second-biggest economy will walk away from upcoming talks intended to quell the tensions. New Zealand and Australia both count China as their biggest export destination. 

"So far, the market appears to have put more weight on the likely cancellation of US-China trade talks than the lower 10 percent tariff rate that the WSJ reported Trump had opted for," Bank of New Zealand interest rate strategist Nick Smyth said in a note. "Against a backdrop of USD weakness, the NZD has risen to US$0.6580, about 0.5 percent stronger than Friday night’s close."

The Global Dairy Trade auction overnight is the next major event for the kiwi and is expected to show another decline in prices. 

The kiwi dipped to 49.97 British pence from 50.08 pence yesterday as UK Prime Minister Theresa May ratcheted up pressure on her MPs to vote for Brexit otherwise there will be no deal. International Monetary Fund managing director Christine Lagarde said the UK economy would face substantial costs if a deal doesn't eventuate. The local currency traded at 56.27 euro cents from 56.31 cents yesterday. 

The kiwi was almost unchanged at 91.61 Australian cents from 91.60 cents and rose to 4.5092 Chinese yuan from 4.5000 yuan yesterday. It increased to 73.54 yen from 73.37 yen. 


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