NZ dollar heads for 0.1% weekly fall with jittery markets over weaker yuan
By Rebecca Howard
July 20 (BusinessDesk) - The New Zealand dollar is heading for a 0.1 percent weekly fall against the greenback as China allowed the yuan to fall further, adding to jitters that the US-China trade skirmish could weigh on Chinese growth.
The kiwi traded at 67.54 US cents as at 5pm in Wellington versus 67.45 cents as at 8.30am and 67.82 cents yesterday. It traded at 67.63 US cents in New York last Friday. The kiwi rose to 4.5829 Chinese yuan from 4.5693 yuan yesterday.
The People's Bank of China set the dollar's reference rate at 6.7671 yuan, guiding the Chinese currency 0.9 percent lower, Dow Jones Newswires reported. The central bank determines a daily exchange rate and allows trading as much as 2 percent above or below that level in mainland China. The weaker yuan is seen giving Chinese products an advantage in US markets, offsetting some of the recent tariff impacts.
"Trade wars and currency wars are intertwined ... it gives them (China) an edge," said Martin Rudings, senior dealer foreign exchange at OMF. US President Donald Trump meanwhile, said in an interview with CNBC on Thursday that a strong dollar puts the United States at a disadvantage, adding that the Chinese yuan "was dropping like a rock".
However, concerns that China's economic growth could be hit by the trade war have weighed on both the kiwi and the Australian dollar.
Rudings said with little data on the immediate horizon, the yuan and those concerns will continue to weigh. "We never really had a close correlation with the yuan until the trade wars ignited, but now we seem to be attached to it," he said.
If China's currency continues to depreciate "we will probably see the kiwi have another crack at its lows," he said.
The trade-weighted index was at 72.83 from 72.89 yesterday while the kiwi was at 91.67 Australian from 91.41 cents yesterday.
The local currency fell to 57.90 euro cents from 58.22 cents yesterday and traded at 51.82 British pence from 51.86 pence. It fell to 75.79 yen from 76.45 yen.
New Zealand's two-year swap rate was unchanged at 2.13 percent and 10-year swaps declined 3 basis point to 2.98 percent.