NZ dollar gains against Aussie as investors fret about trade war impact

Thursday 5th April 2018

The New Zealand dollar rose against the Australian dollar as investors shrugged off better data across the Tasman and remained jittery about the potential impact of a global trade war. Concerns did ease slightly in Asian trading on signs the US is willing to negotiate.

The New Zealand dollar traded at 94.77 Australian cents from 94.68 Australian cents as at 8am and from 94.55 cents late yesterday. It traded at 72.92 US cents as at 5pm in Wellington from 73.04 US cents as at 8am and 72.84 cents late yesterday.

Global markets have been volatile after tit-for-tat tariffs announced by China and the US and while some of those concerns eased after the US expressed a willingness to negotiate, the sentiment is still fragile. According to Reuters, Trump’s top economic adviser, Larry Kudlow, when asked whether the latest U.S. tariffs plan may never go into effect and may be a negotiating tactic, told reporters: “Yes, it’s possible. It’s part of the process.” He called the announcements by the two countries mere opening proposals.

The kiwi benefited as the Aussie remained under pressure.

"We saw better-than-expected retail sales numbers out of Australian yesterday and better trade numbers today and in normal market conditions, you would expect the Aussie to have a bit more strength than what we have seen," said Alex Hill, head of dealing at HiFX.

"What's going on with trade war talk and (US President Donald) Trump and China is weighing on the Aussie than the kiwi at the moment, with Australia's closer correlation to Chinese trade from a commodities perspective," said Hill.

"It's just not letting the Aussie push on as much as the kiwi is," he added. Positive local data, including yesterday's improving consumer confidence and bigger-than-expected budget surplus coupled with data today that point to rising property values have also helped underpin the kiwi.

The trade-weighted index rose to 74.97 from 74.85. The kiwi traded at 59.38 euro cents from 59.33 cents and gained to 77.96 yen from 77.61 yen. It rose to 4.5966 yuan from 4.5832 yuan and gained to 51.81 British pence from 51.71 pence.

New Zealand's two-year swap rate fell three basis points to 2.21 and 10-year swap rate was unchanged at 3.09 percent.

(BusinessDesk)

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