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NZ dollar may gain on Trump uncertainty

NZ Newswire logoNZ Newswire 22/05/2017 Paul McBeth

A new $5 note. © Mark Tantrum/Getty Images A new $5 note. The New Zealand dollar may gain against the greenback this week as investors question whether US President Donald Trump's fiscal policies will get bogged down in political scandal and weigh on the need for aggressive rate hikes by the Federal Reserve.

The kiwi edged up to US69.36c as at 5pm in Wellington from 69.25c on Friday in New York.

New Zealand's currency is recovering from an 11-month low against the greenback it reached this month.

This comes as investors grow increasingly uneasy about Mr Trump's ability to forge ahead with planned tax cuts and infrastructure spending since the sacking of FBI director James Comey and the ongoing investigation into pre-election links to Russia.

The White House's fiscal plans had been seen as adding an inflationary stimulus to the economy at a time when the Fed was already keen to hike interest rates.

"Trump firing the FBI director has created uncertainty enough to say, will he enact the policies, the tax reform and infrastructure spend, and the market's just losing a little bit of faith in the Trump reflation trade at the moment," said Graham Parlane, private client manager at OMF.

"There's a little more potential for the kiwi to go a bit higher on the week - there's been reasonably negative sentiment around the kiwi for a while now as it loses its yield advantage, but with this US dollar turning turtle, that sentiment could easily unwind."

Domestically, Fonterra's opening forecast for the 2018 farmgate payout will be watched on Wednesday, as will the government's budget the following day, which is likely to show a strong set of accounts.

The local currency rose to 77.33 yen from 77.05 yen last week and gained to 4.7774 Chinese yuan from 4.7665 yuan. It increased to 61.97 euro cents from 61.54 cents and rose to 53.36 British pence from 53.12 pence. The kiwi gained to A93.21c from 92.78c last week.

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