NZ dollar gains as China's Li makes soothes trade fears

NZ dollar gains as China's Li makes soothes trade fears; GDP awaits

By Paul McBeth

Sept. 20 (BusinessDesk) - The New Zealand dollar rose above 66 US cents on optimism China won't devalue its currency in a trade war with the US.

The kiwi increased to 66.15 US cents as at 8am in Wellington from 65.94 cents yesterday. It gained to 4.5283 Chinese yuan from 5.170 yuan.

Stocks on Wall Street and commodity prices gained as fears over the US-China trade war eased after Chinese Premier Li Keqiang told the World Economic Forum in China that a one-way devaluation of the yuan posed more harm than good for Asia's biggest economy. The world's two biggest economies have been escalating tariffs in a trade war that analysts fear will slow global growth. The latest round of tariffs announced this week were smaller than expected, soothing some concerns and damping recent volatility in markets.

Li's comments "suggested that China would not actively use its currency as a weapon in the US-China trade war but market forces could obviously still weaken CNY on any escalation of trade tensions, and China wouldn’t necessarily prevent that from happening," Bank of New Zealand senior markets strategist Jason Wong said in a note. The Australian and New Zealand dollars "got oversold on trade fears and with Trump taking a more moderate position on tariffs, it has allowed a relief rally to take place."

Locally, second-quarter gross domestic product data is expected to show New Zealand's economy grew 0.8 percent. ANZ Bank New Zealand economists said the data will determine the starting point for the Reserve Bank's output gap and its medium-term track for inflation. Traders have been pricing in as much as a 50 percent chance for an interest rate cut and governor Adrian Orr has left the door open to such a move.

The kiwi was almost unchanged at 91.05 Australian cents from 91.04 cents and gained to 74.26 yen from 74.08 yen yesterday. It rose to 50.32 British pence from 50.14 pence and increased to 56.67 euro cents from 56.47 cents yesterday. The trade-weighted index was at 71.65 from 71.51 yesterday.

(BusinessDesk)

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