NZ dollar gains on optimism Canada may join US, Mexico trade talks

Wednesday 29th August 2018

The New Zealand dollar gained as investors hope a North American Free Trade Agreement can be concluded successfully with Canada in the tent.

The kiwi rose to 67.09 US cents as at 8am in Wellington from 66.81 cents. The trade-weighted index increased to 72.28 from 72.08.

Investors were buoyed yesterday when the US and Mexico reached an agreement to replace Nafta, allaying concerns over the threat growing trade protectionism poses to global growth. That got another boost from Canadian foreign minister Chrystia Freeland travelling to Washington in an effort to re-join the trade talks. Still, the stand-off between the US and China remains the biggest threat and President Donald Trump said overnight that "it’s just not the right time to talk right now", referring to that relationship.

"While there remain a number of sticking points between Canada and the US, including the protections afforded to the Canadian dairy sector, the market seems to be viewing recent developments positively for now," Bank of New Zealand interest rate strategist Nick Smyth said in a note. "The CAD is the second best performing G10 currency on the day and is at its strongest level since June (although the Mexican peso, in contrast, has fully reversed its post-agreement gains)."

ANZ Bank New Zealand economists said in a note the positive trade headlines are supporting the kiwi dollar. However, the US-China relationship remains the "elephant in the room" and "little progress seems to have been made there". The kiwi has support at 66.30 US cents and faces resistance at 67.50 cents, they said.

No local data is scheduled for today, although Reserve Bank governor Adrian Orr will deliver an off-the-record speech to financial services professionals this evening. Orr was recently at the central bankers' forum at Jackson Hole, Wyoming, and in an interview with Bloomberg said the biggest challenge facing him at the moment was stoking inflation.

The kiwi rose to 91.41 Australian cents from 91.19 cents yesterday and gained to 4.5620 Chinese yuan from 4.5548 yuan. It advanced to 74.58 yen from 74.29 yen yesterday and traded at 57.35 euro cents from 57.26 cents. The local currency increased to 52.12 British pence from 51.92 pence yesterday.

(BusinessDesk)

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