NZ dollar edges higher, awaiting further impetus

NZ dollar edges higher, awaiting further impetus

By Jenny Ruth

June 17 (BusinessDesk) - The New Zealand dollar was slightly stronger as the market awaited further developments affecting global trade and on other geopolitical fronts such as the attacks last week on oil tankers in the Gulf of Oman.

The kiwi was trading at 65.06 US cents at 5pm in Wellington from 64.91 at 8am and 64.89 in New York on Friday. The trade-weighted index edged up to 71.74 points from 71.61.

“We’ve drifted gradually higher over the course of the day. It seems appropriate, given the sharp decline on Friday,” says Mike Shirley, a dealer at Kiwibank.

The domestic currency had been trading at 65.65 US cents early in the Friday session.

A lot of negative news broke towards the end of and after local trading on Friday, including the United States accusing Iran of conducting the tanker attacks, India imposing retaliatory tariffs on US imports and ongoing news about the impact of the China/US trade war.

“But none of those weighed on sentiment after our market opened,” Shirley says. In addition, the 65 US cent level had previously been a strong resistance point, he says.

US officials appear to be frustrated that long-standing allies, including Germany and Japan, have requested stronger evidence linking Iran to the tanker attacks, a degree of scepticism that underlines the deterioration in relationships during President Donald Trump’s term.

Although the captain of the Japanese tanker said it was a “flying object” and not a mine that did the damage, US Secretary of State Mike Pompeo continues to insist that the evidence against Iran is “indisputable” and “unmistakable.”

India’s move to impose tariffs on 28 US products, including almonds and apples, follow Washington’s refusal to exempt it from steel and aluminium tariffs and Trump’s announcement earlier this month that the US was withdrawing India’s preferential trade treatment.

US-India bilateral trade was worth US$142 billion in 2018 and the loss of preferential status will affect US$5.6 billion worth of Indian exports that were previously duty free.

Shirley says the results of this week’s Global Dairy Trade Auction, which will be released early Wednesday, “could take the head out of any kiwi rally that we might see” if prices fall again.

The headline dairy index has fallen in each of the last two auctions, although prices are still up 18 percent so far in 2019.

Otherwise, all eyes will be on the Federal Reserve when it announces its latest monetary policy decision early Thursday, New Zealand time, and on New Zealand’s March quarter GDP data due out at 10:45am on Thursday.

Economists expect the economy expanded 0.6 percent in the three months, faster than the Reserve Bank’s 0.4 percent forecast.

The New Zealand dollar was trading at 94.59 Australian cents from 94.44, at 51.67 British pence from 51.51, at 58.00 euro cents from 57.92, at 70.65 yen from 70.43, and at 4.5046 Chinese yuan from 4.4948.

The New Zealand two-year swap rate edged up to 1.3722 percent from 1.3591 percent on Friday while the 10-year swap rate was unchanged at 1.8300 percent.

(BusinessDesk)

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