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Kiwi strengthens on optimism over US-China trade talks

 The New Zealand dollar strengthened against the US greenback amid optimism about trade talks between the US and China. 

China is New Zealand’s single-biggest export market. Eyes are also on New Zealand’s latest trade balance, due this morning. It is expected to show a $200 million deficit for February, after posting a $914 million deficit in January, which was a record for that month of the year. 

The kiwi traded at 69.04 US cents at 8:32am in Wellington from 68.76 cents at 5pm on Monday. The trade-weighted index was at 74.72 from 74.50.

“Kiwi remains buoyed as new-found optimism around US-China trade talks saw it extend gains against the US dollar,” ANZ Bank New Zealand economists Sharon Zollner and Sandeep Parekh said in a note. “Positive (minor) US data did little to halt the kiwi with markets looking ahead to New Zealand trade data due today.” 

On Wednesday, the Reserve Bank will offer its latest official cash rate review. It’s widely expected to keep its cash rate at 1.75 percent, though economists are divided on whether the central bank might cut rates any time soon.

“In our view, the RBNZ is likely to keep the cash rate steady for a good while yet as it monitors risks — both negative and positive — to the labour market and the trajectory for inflation,” Bank of New Zealand senior economist Craig Ebert said in a note. “We don’t see a clear reason for the RBNZ to ease monetary policy, particularly when New Zealand wholesale rates have already shifted lower, alongside recent global moves.”

The New Zealand dollar gained to 97.14 Australian cents, from 97.09 yesterday.

“Expect the kiwi to control direction as the RBNZ meeting nears,” ANZ Bank’s Zollner and Parekh noted.

The New Zealand dollar rose to 52.33 British pence from 52.05 on Monday, while it advanced to 61.01 euro cents from 60.85. 

A report showing better-than-expected business confidence in Germany offered some support for the euro earlier in the day, though it gave up those gains.

"Better-than-expected German data saw the euro edge the kiwi overnight,” according to ANZ Bank’s Zollner and Parekh. “This was a welcome change for the euro as it weathers successive bouts of poor data alongside a dovish European Central Bank."

The kiwi climbed to 75.94 yen from 75.61 yesterday, while it was at 4.6318 Chinese yuan from 4.6167 on Friday. 


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