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NZ dollar falls as tit-for-tat tariffs from US

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NZ dollar falls as tit-for-tat tariffs from US, China unsettle markets, weigh on commodities By Jonathan UnderhillNZ dollar falls as tit-for-tat tariffs from US, China unsettle markets, weigh on commodities

By Jonathan Underhill

June 18 (BusinessDesk) – The New Zealand dollar fell as China responded to US tariffs by imposing its own trade levies on US$34 billion of US goods, unsettling markets and weighing on commodities.

The kiwi dollar declined to 69.39 US cents as at 8:30am in Wellington from 69.48 cents in New York on Friday. The trade-weighted index was at 73.50 from 73.56.

China responded to US tariffs on US$50 billion of Chinese goods by targeting farm commodities and cars from the US for tariffs of its own, and flagging a further US$16 billion of goods such as coal and oil that will face tariffs down the track. US President Donald Trump had warned he would impose further tariffs if China responded. The CRB index of 19 commonly traded commodities dropped 1.4 percent on Friday to sit at a two-month low. Commodity-linked currencies such as the kiwi and the Aussie fell.

“Risk-off trading dominated the end of last week as a game of chicken on trade commenced between the US and China,” said Con Williams, rural economist at ANZ Bank New Zealand, in a note. “So far trade tensions have actually benefited New Zealand exporters with solid demand from China (ie less competitive pressure) and a lower NZD. This next round of tariffs risks contagion into all markets though, so we will be watching closely for signs this could ‘tip’ the balance.”

Stronger-than-expected US consumer sentiment and manufacturing data helped underpin the greenback on Friday.

In New Zealand today, traders will be watching for the performance of services index for May and the big local event this week is likely to be gross domestic product for the first quarter, which is expected to show the economy grew 0.5 percent in the first three months of the year compared to a 0.6 percent pace in the fourth quarter of 2017.

The kiwi dollar traded at 59.82 euro cents, little changed from Friday in New York. It was little changed at 93.27 Australian cents and at 52.28 British pence.

The kiwi traded at 76.77 yen from 76.85 yen and slipped to 4.4673 yuan from 4.4711 yuan.

(BusinessDesk)

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