NZ dollar eases as US-China trade war, Brexit saga drag on
By Jenny Ruth
May 23 (BusinessDesk) - The New Zealand dollar was slightly weaker as indications of softness in the domestic economy added to worries about the United States-China trade war and the ongoing Brexit saga.
The kiwi was trading at 64.88 US cents at 5pm in Wellington from 64.94 at 8am. The trade-weighted index eased to 71.75 points from 71.77.
“We’re just drifting off day by day. This China stoush is ongoing and there’s a bit of risk-off in equities markets,” says Tim Kelleher, the head of institutional foreign exchange sales at Commonwealth Bank of Australia.
Corporate announcements in New Zealand haven’t helped domestic sentiment, Kelleher says.
Dairy giant Fonterra downgraded its expected payout for the season finishing this month, reflecting slightly weaker than expected prices for whole milk powder offset by the currency’s decline.
ASB Bank economist Nathan Penny estimated the change will reduce aggregate Fonterra farmer incomes by about $225 million.
Fonterra also downgraded its earnings guidance and says it plans to sell more assets.
As well, courier company Freightways said softer express package business growth in the second half poses some risks for the 2020 financial year.
“If you were reflecting on the kiwi economy, you would say both of those were pretty poor,” Kelleher says.
“Even though the kiwi looks like it’s oversold on the charts, it’s not bouncing.”
On the Brexit front, there is speculation in Britain that Prime Minister Theresa May could announce her resignation as early as Friday after her latest failure to get parliament to agree to her Brexit proposals.
The New Zealand dollar was trading at 94.37 Australian cents from 94.39, at 51.30 British pence from 51.28, at 58.20 euro cents from 58.23, at 71.57 yen from 71.65 and at 4.4855 Chinese yuan from 4.4851.
The New Zealand two-year swap rate fell to 1.5041 percent from 1.5239 yesterday, while the 10-year swap rate eased to 1.9950 percent from 2.0355.