The New Zealand dollar has been a beneficiary of the souring sentiment on the greenback as the US trade war takes its toll on the world’s reserve currency.
The US dollar index – a measure of the greenback against a basket of currencies – has shed 4.8% so far this year as President Donald Trump embarked on his campaign of imposing tariffs to reset the global trade system. The White House is seeking to reduce the allure of the greenback to make its manufacturing sector more attractive in export markets.
The kiwi climbed to 58.23 US cents at 7.30am in Auckland from 57.61 cents yesterday, and has climbed 4.1% so far this year. The local currency was stronger across the board, rising to 91.15 Australian cents from 91.01 cents yesterday and advancing to 53.31 euro cents from 52.92 cents.
“We previously saw 58 US cents as the initial level of resistance for the NZ dollar, but the currency has blasted up through that to 58.20, up 1.3% from last week’s close and at its highest level this year,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “We are cautious about further possible gains in the NZ dollar, ahead of reciprocal tariff announcements due early April.”
The local currency’s gains were against a backdrop of an improved sentiment among investors with stock markets in Europe and on Wall Street extending their rally on Friday.
Mining companies buoyed by a stronger gold price and energy companies led stock markets in Europe, with London’s FTSE 100 index up 0.6% and Germany’s DAX 30 increasing 0.7%. Upcoming talks between Trump and Russian President Vladimir Putin aimed at ending the Ukraine war added to the recovery in investor sentiment.
Correcting the correction
Wall Street continued its recovery from the correction territory, with the S&P 500 up 1%, shrugging off sluggish auto sales in the latest retail spending data and a cut in global growth forecasts from the Organisation for Economic Cooperation and Development.
US-listed Chinese companies rallied after stronger-than-expected retail sales and industrial production figures in China, and as Baidu released a new artificial intelligence model.
The Chinese government also released a 30-point plan to boost domestic consumption, although details remain light.
The US Federal Reserve is among a slew of central banks reviewing monetary policy this week, which are expected to continue gauging the impact of Trump’s tariff programme.
And Nvidia’s annual developers conference kicks off with a keynote speech from chief executive Jensen Huang.
The upbeat sentiment is expected to buoy Australian markets today, with futures pointing to a 0.7% gain for the S&P/ASX 200 index.
Reporting by Paul McBeth. Image from Marek Studzinski on Unsplash.
