NZ dollar benefits from strong data, trade optimism

Tuesday 26th February 2019

The New Zealand dollar continues to benefit from strong retail sales data yesterday and positive headlines on the US-China trade tensions.

The kiwi was trading at 68.81 US cents at 8am in Wellington from 68.63 at 5pm yesterday. The trade-weighted index was at 74.27 points from 74.15.

Global sentiment got a lift when US President Donald Trump said that a trade pact could happen soon and that both sides were very close to a deal. He also said that tariffs that are due to come into effect on March 1 would be delayed.

"Pro-growth comments from China’s Xi Jinping also added to optimism, after he said that management of risks should be done from a backdrop of stable growth, suggesting China’s tolerance for softening growth may be reaching its limits," said ANZ Bank FX/Rates strategist Sandeep Parekh,

Domestically the focus will be on a speech by RBNZ deputy governor Geoff Bascand about proposed changes to bank capital requirements. Last Friday, the kiwi took a tumble when Bascand said New Zealand’s top four banks may have to raise $20 billion in new capital during the next five years to meet the central bank’s proposed new requirement and reiterated a rate cut might be possible.

Another international ratings agency, Standard & Poor’s, has weighed in to call the Reserve Bank’s proposed new bank capital requirements a “burden” on the Australian parents of New Zealand’s four major banks. It said the additional capital won't improve the big four banks’ credit ratings.

The New Zealand dollar was trading at 95.92 Australian cents from 96.07, at 76.46 yen from 75.93, at 52.60 British pence from 52.51, at 60.61 euro cents from 60.51 and at 4.5889 Chinese yuan from 4.5890.

(BusinessDesk)

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