RBNZ pressures NZ dollar

Investors in Asia largely brushed off the ongoing trade fight between China and the U.S., with Shanghai’s bluechip stocks climbing 2.4%, a move supported by the tech and financial sectors.

Solid economic data and possible government intervention through monetary and fiscal policies encouraged investors to take some risk this week.

Data on Wednesday showed that China’s exports have not yet been impacted by U.S. tariffs rising 12.2% in July from last year. The Producer Price Index cooled slightly in July, coming at 4.6% from 4.7% in June and suggesting that policymakers may still have further room to loosen monetary policy.

However, if President Trump proposed tariffs of 25% on $200 goes ahead with his bln worth of Chinese

Currency markets were in focus with the New Zealand Dollar tumbling more than 1% against the U.S. Dollar. NZDUSD fell to its lowest level since March 2016 after the Reserve Bank of New Zealand surprised traders by announcing that it is committed to keeping interest rates at record lows through 2020.

The central bank also downgraded its 2019 GDP forecast to 2.6% from 3.1%. Given the slowdown in economic activity and the ongoing global trade dispute, the RBNZ is sending a message that further easing may be possible in the months ahead. This is likely to keep the NZD under pressure and test new lows below 0.65 by year-end.