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Relief over NAFTA helps lift NZ dollar

NZN 27/04/2017 Paul McBeth

The New Zealand dollar rose from a four-month low on Thursday after US President Donald Trump agreed not to terminate the North American Free Trade Agreement just yet.

This gave investors some relief that the world's biggest economy is adamant in raising trade barriers.

The kiwi rose to US69.10c as at 5pm in Wellington from 68.68c earlier Thursday to be little changed from 69.26c Wednesday.

Mr Trump told his Mexican and Canadian counterparts he won't immediately kill Nafta after earlier reports citing an unnamed White House official indicated he planned to sign an executive order ending the deal as early as this week.

The North American nations will instead seek to renegotiate the trade and investment deal, which Mr Trump has blamed for hollowing out US manufacturing.

His administration's anti-trade rhetoric, which has included the imposition of new tariffs on Canadian lumber this week, has weighed on commodity-linked currencies whose nations rely on export industries including the New Zealand, Australian and Canadian dollars.

"The kiwi's come back a bit today on the news that Trump has decided not to kill Nafta straight away," said Graham Parlane, private client manager at OMF.

"The worries over the trade theme, the diminishing yield advantage generally, the contraction of credit in New Zealand, the housing market pulling back to a more normal pace, immigration heading into the election, these all for me are factors that are likely to weigh so I'm biased to the downside in the near term."

Finance Minister Steven Joyce announced plans to cut the government's net debt target to between 10-and15 per cent of gross domestic product by 2025 and boosted planned infrastructure spending over the next four years. Mr Joyce will unveil his first budget next month and left the door open for tax adjustments.

The local currency rose to A92.32c from 92.06 cents. The kiwi fell to 4.7651 Chinese yuan from 4.7674 yuan and declined to 76.87 yen from 77.05 yen. It edged up to 63.37 euro cents from 63.28 cents and declined to 53.70 British pence from 53.94 pence.

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