Thursday 16 February 2017 05:07 PM
NZ dollar extends gains on concern NZ dollar extends gains on concern 'Trump factor' being over-hyped
By Jonathan Underhill
Feb. 16 (BusinessDesk) - The New Zealand dollar extended its gains amid concern financial markets have been building too
much optimism about US President Donald Trump's ability to deliver tax cuts and US economic growth.
The kiwi rose to 72.25 US cents as at 5pm in Wellington, and earlier touched a week-high of 72.40 cents from 71.73 cents
late yesterday. The trade-weighted index rose to 78.55 from 78.11.
The US dollar initially gained overnight after figures showed the US consumers price index rose 2.5 percent in the 12
months through January, the biggest year-on-year gain since March 2012, and faster than economists were expecting. But
the greenback subsequently gave up its gains amid concern too much weight has been given to possible Trump policies such
as the tax cuts that he has hinted at, given the White House has to win over the Congress and Senate for major policy
changes.
"The market's having second thoughts on being long the US dollar," said Martin Rudings, senior dealer at OMF. "The
likelihood of him disappointing the market is quite high. It's a crossroads."
The kiwi dollar didn't move much after the release of the ANZ-Roy Morgan consumer confidence index, which showed
confidence slipped to 127.4 this month from 128.7 in January, still above its long-term average. It also didn't move
much after Finance Minister Steven Joyce said tax cuts were one of the four key things he was considering for the 2017
budget, along with reducing debt and infrastructure spending.
Rudings said the market "has been sitting pretty short kiwi dollars since the MPS", meaning traders are more inclined to
believe the kiwi will fall since the Reserve Bank indicated there wasn't much prospect of a rate hike as soon as this
year. Still, if the US dollar weakens further, the kiwi "could head towards 72.80 US cents," he said.
The kiwi rose to 57.96 British pence from 57.52 pence and gained to 68.08 euro cents from 67.74 cents. It rose to 93.66
Australian cents from 93.42 cents and gained to 82.22 yen from 81.96 yen. The kiwi rose to 4.9543 yuan from 4.9233 yuan.
New Zealand's two-year swap rose 5 basis points to 2.37 percent while 10-year swaps rose 4 basis point to 3.53 percent.
(BusinessDesk)
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