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NZ markets wait for US guidance

NZN 23/01/2017 Rebecca Howard

Both the New Zealand dollar and the stock exchange are a tad weaker in the wake of US President Donald Trump's inauguration and analysts expect the situation to continue as markets adopt a wait-and-see approach.

ANZ Bank New Zealand senior economist Phil Borkin said Saturday's inauguration did little to shed light on the Trump's administration's plans.

Markets had rallied strongly after Trump's election in November with the greenback pushing higher on promises of tax cuts and fiscal spending.

But Borkin said markets were now showing a healthy dose of scepticism because of a lack of detail and uncertainty how Trump will achieve the goals he's set out.

"Until we get that information, until markets are able to dissect it, we will remain in this holding pattern," he added.

Longer-term Borkin said the kiwi will likely weaken against the US dollar but will hold up on a trade-weighted index basis.

"The economic credentials here are very good," he said.

The New Zealand dollar was trading at 71.84 US cents versus 72.14 cents late Friday and 78.63 on a TWI-basis versus 78.90 late Friday.

New Zealand Institute of Economic Research senior economist Christina Leung also said she doesn't expect a "sharp easing" in the currency from Trump's presidency.

"The continued solid growth outlook for the NZ economy should continue to support the NZD at a high level," said Leung.

Westpac Banking Corp acting chief economist Michael Gordon also underscored the lack of clarity around potential policy to predict the impact.

"The policies he has been pushing are largely domestically focused and it's hard to pin down what they actually mean for New Zealand, which means you are coming down to stuff that he hasn't promised."

Hamilton Hindin Greene broker James Smalley also said investors are waiting for more clarity as "we are in uncharted territory".

He noted any move toward greater protectionism in trade will have an impact.

"We are obviously a very open, trade-based economy and rely on global growth and global trade and anything that's negative for that, is going to be negative for us," he said.

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