NZ dollar gains as White House posturing, trade tensions fuel uncertainty

Friday 21st December 2018

The New Zealand dollar rose as equity market volatility spiked to its highest level since February amid concerns US policymakers won't avoid a government shutdown, and as global trade tensions remain high amid accusations of cyber attacks.

The kiwi increased to 67.80 US cents as at 8am in Wellington from 67.37 cents yesterday, when it was sold off sharply on weak local economic growth data and after the US Federal Reserve flagged a less aggressive track for higher rates in 2019. The trade-weighted index was at 74.02 from 73.83 yesterday.

The Volatility Index, known as Wall Street's 'fear gauge' jumped 18 percent to 30.15, the highest level since Feb. 8, as investors weigh up the impact of the Fed's interest rate track on markets. Meanwhile, geopolitical concerns continue to threaten uncertainty in markets as US President Donald Trump baulked at a stop-gap funding measure denying him US$5 billion to build a wall on the Mexican border. The legislation is needed to avoid a partial shutdown of the Federal government through the Christmas period.

Adding to the uncertainty, US authorities have indicted Chinese hackers for coordinating a decade-long campaign to steal intellectual property in the US. New Zealand's Government Communications and Security Bureau joined the criticism of the Chinese state-sponsored cyber attack. Trade tensions between the US and China have weighed on global markets, with economists predicting the stoush will crimp worldwide growth. The kiwi increased to 4.6669 Chinese yuan from 4.6540 yuan.

"Global equity markets are sinking deeper into the red, the US yield curve flattens further and the USD has weakened overnight, reversing some of its post-Fed gains yesterday," Bank of New Zealand senior markets strategist Jason Wong said in a note. "This leaves the NZD higher in overnight trading but still 1 percent down since this time yesterday."

Domestically, the ANZ Roy Morgan consumer confidence survey is due for release today, providing the last piece of economic data before the local market thins out for the Christmas and New Year holiday period.

The kiwi rose to 95.31 Australian cents from 94.85 cents yesterday and fell to 75.18 yen from 75.66 yen. It traded at 53.42 British pence from 53.38 pence yesterday and fell to 59.05 euro cents from 59.21 cents.

(BusinessDesk)

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