NZ dollar remains below 69 US cents on weaker commodities, trade threats

The New Zealand dollar was little changed below 69 US cents, having fallen along with other commodity-linked currencies as raw material prices fell and the market focussed on US President Donald Trump's protectionist approach to trade.

The kiwi traded at 68.76 US cents at 5pm in Wellington, little changed over the course of the day, having fallen overnight from 69.10 cents late yesterday. The trade-weighted index fell to 74.75 from 75.05. 

Commodity markets have been rattled by the Trump administration's imposition of new tariffs on Canadian softwood lumber and the US president's ambition to scrap the North American Free Trade Agreement. The CRB Index of 19 commonly traded commodities fell 0.7 percent to a five-month low overnight while yesterday Fonterra Cooperative Group said its milk collection "improved in March with better growing conditions across New Zealand," recording an 8 percent gain from the same month last year to 147 million kilograms of milk solids.

"All the commodity currencies have been hammered - the kiwi more than most," said Imre Speizer, senior market strategist at Westpac Banking Corp. "The big picture from quite a while ago was the US dollar going up after Trump got elected and more recently it is about protecting US trade. The feeling is he is hammering countries and products. Even if New Zealand doesn't get singled out directly, it will be felt indirectly."

He said any reaction to Fonterra's milk collection is most likely to show up at next week's GlobalDairyTrade auction. The local currency fell to 91.97 Australian cents from 92.02 cents, which Speizer said reflected the tendency for the Aussie to benefit more than the kiwi when global risk appetite improves.

There wasn't much currency reaction when figures showed New Zealand's trade surplus was $332 million in March while the annual trade deficit narrowed to $3.67 billion from $3.77 billion. Other figures showed seasonally adjusted dwelling consents fell 1.8 percent to 2,651 in March after rising a revised 17 percent in February. The kiwi also didn't move much after the ANZ Business Outlook showed business confidence stayed upbeat in April as firms expect to see more activity on their own books and generate bigger profits. 

Speizer said the kiwi is likely to be in a range of 67 US cents to 68 cents over the next month but may not push too much lower because of "near record short" positions in the currency. "Every man and his dog have sold kiwi and it can't go much further".

The kiwi fell to 63.27 euro cents from 63.37 cents late yesterday and declined to 53.24 British pence from 53.70 pence. The local currency fell to 4.7396 Chinese yuan from 4.7651 yuan and declined to 76.42 yen from 76.87 yen.

New Zealand's two-year swap rate fell 3 basis points to 2.29 percent and the 10-year swaps fell 2 basis points to 3.36 percent.

(BusinessDesk)