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Kiwi gains on 'Trump factor' hype fears

NZ Newswire logoNZ Newswire 16/02/2017 Jonathan Underhill

© Bloomberg The New Zealand dollar extended its gains amid concern financial markets have been building too much optimism about US President Donald Trump's ability to deliver tax cuts and US economic growth.

The kiwi rose to US72.25 cents as at 5pm in Wellington on Thursday, and earlier touched a week-high of US72.40c from US71.73c late Wednesday.

The US dollar initially gained overnight after figures showed the US consumers price index rose 2.5 per cent in the 12 months through January, the biggest year-on-year gain since March 2012, and faster than economists were expecting.

But the greenback subsequently gave up its gains amid concern too much weight has been given to possible Trump policies such as the tax cuts that he has hinted at, given the White House has to win over the Congress and Senate for major policy changes.

"The market's having second thoughts on being long the US dollar," said Martin Rudings, senior dealer at OMF. "The likelihood of him disappointing the market is quite high. It's a crossroads."

The kiwi dollar didn't move much after the release of the ANZ-Roy Morgan consumer confidence index, which showed confidence slipped to 127.4 this month from 128.7 in January, still above its long-term average. It also didn't move much after Finance Minister Steven Joyce said tax cuts were one of the four key things he was considering for the 2017 budget, along with reducing debt and infrastructure spending.

The kiwi rose to 57.96 British pence from 57.52 pence and gained to 68.08 euro cents from 67.74 cents. It rose to 93.66 Australian cents from 93.42 cents and gained to 82.22 yen from 81.96 yen. The kiwi rose to 4.9543 yuan from 4.9233 yuan.

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