NZ dollar falls after China's trade surplus with US balloons

Monday, 14 January 2019, 9:22 pm
Article: BusinessDesk

NZ dollar falls after China’s trade surplus with US
balloons

By Jenny Ruth

Jan. 14 (BusinessDesk) – The New
Zealand dollar drifted downwards after data showed China’s
trade surplus with the US widened to its highest level in
more than a decade, news that is likely to exacerbate
tensions between the two nations.

The kiwi fell to 68.07
US cents at 5pm in Wellington from 68.20 at 8.30am. The
trade-weighted index eased to 73.54 points from
73.70.

“The data is showing that the problem with the US
trade situation isn’t getting any better,” says Peter
Cavanaugh, senior client advisor at Bancorp Treasury
Services.

China’s trade surplus with the US grew 17
percent in 2018, with exports to the US rising 11.3 percent
in the year while imports rose just 0.7 percent.

The
market had been encouraged last week that the two nations
would strike a deal after trade negotiations between Chinese
and US officials in Beijing were extended by a day to three
days.

US President Donald Trump regards China’s trade
surplus as somehow a form of theft.

Cavanaugh says some of
the changes China is making won’t do much to help
encourage imports from the US.

For example, China reducing
the tariff on cars made in the US from 25 percent down to 10
percent is more likely to benefit German brands such as
Mercedes Benz, which manufactures cars in the US, and BMW,
which assembles cars in the US, than US brands.

Adding to
the adverse trade data and boding ill for the global
economy, the Chinese economy “is showing signs of
suffering from credit issues and over-leveraging,”
Cavanaugh says.

“The trade data is showing that
they’re still busily shipping stuff out to the rest of the
world, particularly the US.”

The figures are adding to
already uncertain market sentiment and reinforce comments
from Federal Reserve chair Jerome Powell that trade issues
and the outlook for global growth are among his major
concerns.

Also keeping the market on edge is the upcoming
vote on Tuesday in Britain’s parliament over whether to
support Prime Minister Theresa May’s Brexit plan.

May
told the BBC that she’s making a last-ditch attempt to
persuade members of parliament to back her Brexit
deal.

But she said that no Brexit is more likely than no
deal, and she also warned that trust in politics would
suffer “catastrophic harm” if Brexit, approved by a
referendum in 2016, isn’t implemented.

Opposition Labour
leader Jeremy Corbyn is promising a vote of no confidence if
parliament doesn’t vote for May’s Brexit plan.

The
British pound rallied on May’s comments and the New
Zealand dollar fell to 52.97 pence from 53.06 this
morning.

Against the Australian dollar, the kiwi rose to
94.67 cents from 94.54. But it fell to 73.59 yen from 73.92,
to 59.32 euro cents from 59.52 and to 4.5974 Chinese yuan
from 4.6100.

The New Zealand two-year swap rate fell to
1.8850 percent from 1.9233 on Friday; the 10-year swap rate
dropped to 2.5780 percent from
2.6225.

(BusinessDesk)

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