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NZ dollar weaker as reduced Mexico tensions lift greenback

NZ dollar weaker as reduced Mexico tensions lift greenback

By Jenny Ruth

June 10 (BusinessDesk) - The New Zealand dollar was weaker as the greenback strengthened in relief that US President Donald Trump has indefinitely postponed tariffs on Mexican imports.

The kiwi was trading at 66.30 US cents at 5pm in Wellington, from 66.61 at 7:55am and 66.16 at 5pm on Friday. The trade-weighted index eased to 72.81 points from 72.96.

Weaker than expected jobs number in the US had briefly depressed the greenback until the news about Mexico broke.

Trump had threatened to impose a 5 percent tariff from today on all Mexican imports, rising by five percentage points a month up to 25 percent unless Mexico took action to reduce the number of Central American refugees reaching the US border.

Earlier this year, a similar threat to close the US/Mexico border was called off at the last minute.

“There have been a number of comments over the weekend that he backed down again on a threat," says Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services. "These threats are becoming hollower and less threatening, but he’s the sort of person though, who one day will carry out his threat and it won’t be a small threat.”

However, market nerves are likely to increase leading up to the G20 meeting in Osaka near the end of the month where Trump is expected to meet China’s President Xi Jinping.

Last month, just as financial markets were expecting the US and China to reach a trade accord, Trump raised tariffs on US$200 billion of Chinese imports from 10 percent to 25 percent.

“If Trump and Xi don’t come to some agreement and have some grandstanding announcement, this could really turn into a protracted struggle,” Cavanaugh says.

“That worry is limiting the New Zealand dollar’s upside.”

The New Zealand dollar was trading at 95.09 Australian cents from 94.95, at 52.16 British pence from 52.32, at 58.63 euro cents from 58.85, at 72.02 yen from 72.31 yen and at 4.5968 Chinese yuan from 4.5985.

The New Zealand two-year swap rate edged down to 1.3950 percent from 1.4103 on Friday. The 10-year swap rate was unchanged at 1.9125.

(BusinessDesk)

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