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NZ dollar weaker as US threatens even more tariffs on China


By Rebecca Howard

May 13 (BusinessDesk) - The New Zealand dollar was weaker early Monday after the US moved to impose additional tariffs on China and said there are more to come as last week's talks failed to reach a deal.

The kiwi was trading at 65.80 US cents at 8am Monday versus 65.97 US cents late Friday in New York. The trade-weighted index was at 72.03 versus 72.18 late Friday.

On Friday, the US administration increased tariffs on US$200 billion of Chinese goods, raising the rate from 10 percent to 25 percent. It is now threatening to impose 25 percent on an additional US $300 billion of Chinese goods.

On Sunday, however, White House chief economic adviser Larry Kudlow, in an interview with Fox, said "both sides will suffer" in a trade war, adding that President Donald Trump and President Xi Jinping of China are likely to meet in Japan next month to continue negotiations. Trump was less conciliatory, tweeting that any deal would be "far worse" for China in his second term. "Would be wise for them to act now, but love collecting BIG TARIFFS," he said.

According to ANZ Bank FX Rates strategist Sandeep Parekh, China has vowed to retaliate, but the details of its action remain scant. Chinese Vice Premier Liu has also reiterated that China is looking to agree a deal, but insists it will be a cooperative agreement between the two nations.

The potential fallout from the ongoing trade tensions between the two nations weighs on the kiwi given that China is the country's leading trading partner. Parekh said the market will be keeping a close eye on any further tweets from US President Trump about more tariffs.



The market will also be watching for the yuan level the People's Bank of China sets today, said Mike Shirley, a dealer at Kiwibank.

According to Shirley, the yuan is weaker in the spot market, which "implies it will be set at a lower level today." A weaker yuan would partially offset the impact of the tariffs.

The kiwi was trading at 4.4907 Chinese yuan versus 4.5010 late Friday. It was at 94.23 Australian dollars versus 94.12 and at 50.69 British pence from 50.74. It was trading at 58.62 euro cents from 58.68 and at 72.29 Japanese yen from 72.18.

(BusinessDesk)

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