The New Zealand dollar rose from its lowest levels in more than two years ahead of the July 4 Independence Day Holiday in the US, amid ongoing trade squabbles between the US and China and comments from China that it aims for stability in the yuan.
The kiwi dollar rose to 67.56 US cents as at 8:30am in Wellington from 66.96 cents late yesterday. The local dollar traded at 4.4845 yuan from 4.4873 yuan yesterday while the trade-weighted index climbed to 72.26 from 71.96.
China has imposed a ban on sales by US firm Micron Technology, which has accused China of stealing its IP, following the US decision to block China Mobile from entering the American market. Trade talks between the world's two largest economies, meanwhile, have become bogged down. People's Bank of China governor Yi Gang said the bank aimed to keep its currency broadly stable and not use it as a weapon in a trade war. The comments helped lift the yuan, which was at its weakest level against the greenback in about 10 months this week.
"Markets will be watching to see if any resolution can be achieved this week, with the first round of US tariffs set to come into effect on Friday and China poised to impose countermeasures," Liz Kendall, senior economist at ANZ Bank New Zealand, said in a note. "Of note, the People’s Bank of China has said it won’t use the yuan as a tool in the trade dispute."
The kiwi strengthened even though dairy product prices declined at the Global Dairy Trade auction overnight, led by a larger-than-expected drop in whole milk powder. The GDT price index fell 5 percent from the previous auction two weeks ago. The average price was US$3,232 a tonne. Some 26,519 tonnes of product was sold, up from 21,634 tonnes two weeks ago. Whole milk powder sank 7.3 percent to US$2,905 a tonne.
Today traders will keep an eye on the ANZ commodity price index for June for any further evidence of weakness in New Zealand's exports. Across the Tasman, Australia is scheduled to release trade and retail sales data for May.
The kiwi rose to 91.41 Australian cents from 91.28 cents yesterday when the Reserve Bank of Australia kept its cash rate unchanged.
"It is fair to say that the RBA is less dovish than its RBNZ cousin, and confirmation of that saw this cross react accordingly, touching 0.91," Kendall said.
The New Zealand dollar advanced to 74.72 yen from 74.22 yen yesterday. It rose to 57.93 euro cents from 57.57 cents and gained to 51.20 British pence from 50.99 pence.