NZ dollar gains on China steel stimulus as policymakers meet

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NZ dollar gains as China mulls tax rebate for local steel sector; Fed, ECB meetings loom

NZ dollar gains as China mulls tax rebate for local steel sector; Fed, ECB meetings loom

By Paul McBeth

July 31 (BusinessDesk) – The New Zealand dollar rose in local trading as investors gained confidence from the prospect China may invigorate its domestic steel industry with a tax rebate, ahead of two key central bank meetings on either side of the Atlantic.

The local currency rose to 80.99 US cents at 5pm in Wellington from 80.85 cents at 8am and 80.74 cents yesterday. The trade-weighted index edged up to 72.93 from 72.83. The kiwi is poised for a 1.1 percent monthly gain against the greenback and on the TWI.

China’s Ministry of Industry and Information Technology is considering reinstating an exemption for certain steelmakers from a 17 percent value-added tax in a bid to revive the ailing sector, Reuters reported. The prospect of more Chinese stimulus stoked investors’ appetite for higher-yielding, or riskier, assets, ahead of this week’s central bank meetings in Europe and the US, which may give traders more cause for optimism.

“The kiwi crept up this afternoon, following other currencies, after the Chinese announced a bit of economic stimulus,” said Imre Speizer, market strategist at Westpac Banking in Auckland. “Investors are still positive ahead of the central bank meetings.”

Policymakers on the Federal Open Market Committee begin their two-day meeting on Tuesday in Washington DC ahead of Wednesday’s announcement on monetary policy. Though traders aren’t expecting any announcement of more stimulus, they will be looking for a tweak in the language, Speizer said.

The main event will be the European Central Bank meeting on Wednesday in Frankfurt, where traders will be looking for more action from the regulator after President Mario Draghi went on record saying he will take all measures possible to protect the region’s single currency, a bid that was backed by both France and Germany.

Markets largely shrugged off New Zealand’s National Bank Business Outlook, which showed firms were a little more confident in July. Traders got a small fillip from Australian building permits, which fell less than expected in June.

Fonterra Cooperative Group’s online auction of dairy products will capture market watchers, with traders looking for signs of a turnaround in prices which have been falling in recent months.

The kiwi dollar rose to 65.96 euro cents from 65.72 cents at 5pm in Wellington yesterday and increased to 51.53 pence from 51.39 pence. It declined to 76.93 Australian cents from 77.18 cents yesterday and was little changed at 63.33 yen from 63.27 yen.


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