NZ dollar remains near 5-month high on global trade optimism

Monday 3rd December 2018

The New Zealand dollar remained near a five-month high and may have further to run after the US-China trade truce eased investor fears of a slowdown in global growth.

The kiwi traded at 69.10 US cents at 5pm in Wellington from 69.16 cents at 8am and 68.78 cents in New York on Friday. It last traded around these levels in June. The trade-weighted index advanced to 75.10 from 75.05 last week.

Asian markets were cheered after US President Donald Trump and Chinese President Xi Jinping agreed to a three-month truce in their trade skirmish. Among other things, Trump suspended his decision to impose higher tariffs on Chinese imports next year and China agreed to purchase a “very substantial” amount of farm, energy and industrial goods to reduce the trade gap.

"I think risk assets will be well sought after for a bit," said Martin Rudings, senior foreign exchange dealer at OMF. The kiwi has support around 68.80 US cents and could trade as high as 70 cents.

"The optimism around the trade war relief going forward might push it up a bit higher," he said.

"I am not sure it will last for too long" as the trade truce is also good for the greenback, he said. There is also some skepticism around what will happen next on the trade front.

"I am not sure it's all going to be plain sailing from here."

Looking ahead, investors will be watching for this week's Global Dairy Trade auction where economists say prices might rise given softer production out of Europe. There will also be interest in the monetary policy decision and statement from the Reserve Bank of Australia tomorrow as well as US jobs data later in the week.

The kiwi traded at 93.79 Australian cents from 93.68 cents last week and at 4.7815 Chinese yuan from 4.8009 yuan. It climbed to 78.43 yen from 78.31 yen last week.

The local currency traded at 54.07 British pence from 54.05 pence last week. The kiwi traded at 60.86 euro cents from 60.98 cents last week.

New Zealand's two-year swap rate was unchanged at 2.08 percent; the 10-year swaps were up 1 basis point at 2.90 percent.

(BusinessDesk)

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