Kiwi little changed as Trump links steel tariffs to Nafta wins

Trump's Nafta comments weighed on the Canadian dollar.

(BusinessDesk) - The New Zealand dollar was little changed against the greenback as investors reassessed the prospect of US steel and aluminium tariffs being introduced after President Donald Trump said he'd drop them against Mexico and Canada if he can successfully renegotiate the North American Free Trade Agreement.

The kiwi was unchanged 72.22 US cents as at 8am in Wellington from 5pm yesterday, while the trade-weighted index was at 74.38 from 74.36 yesterday.

Stocks on Wall Street gained after Trump tweeted "tariffs on steel and aluminum will only come off if new & fair Nafta agreement is signed". The imposition of tariffs on the metals raised fears of a global trade war, which is expected to weigh more heavily on an open economy such as New Zealand's. Locally, the upcoming GlobalDairyTrade auction is in view, with prices for whole milk powder tipped to fall with futures down 2 percent since the previous event.

"Market participants have had more time to digest the implications of Trump's import tariffs on steel and aluminium and seem to have come to the conclusion that the market over-reacted last week," Bank of New Zealand interest rate strategist Nick Smyth said in a note. "The near-term threat (to the kiwi) appears to be a break of support if the negative headlines continue on global trade policy, while the top of the range is more of a later threat should the USD downward trend, evident over the past 12 months, resumes."

Trump's Nafta comments weighed on the Canadian dollar, and the kiwi rose to 93.80 Canadian cents from 93.11 cents yesterday. It was little changed at 13.6241 Mexican pesos from 13.6221 pesos yesterday.

The local currency traded at 93.06 Australian cents from 93.16 cents yesterday ahead of the Reserve Bank of Australia policy review today, which is expected to keep the target cash rate unchanged at 1.5 percent.

The kiwi traded at 58.56 euro cents from 58.60 cents yesterday after the regional currency was bolstered by German Chancellor Angela Merkel concluding a coalition agreement. Meantime, Italy's general election didn't provide a clear winner.

The local currency slipped to 52.19 British pence from 52.36 pence yesterday after UK Prime Minister Theresa May said she was confident of reaching a post-Brexit deal on her nation's withdrawal from the European Union.

The kiwi rose to 76.65 yen from 76.26 yen yesterday, and gained to 4.5853 Chinese yuan from 4.5737 yuan.