Kiwi falls as tensions rise over North Korea

The New Zealand dollar fell as escalating tensions between the US and North Korea dampened risk appetite and ahead of what is expected to be a more dovish outlook from the Reserve Bank today.

The kiwi traded at US73.16c as at 5pm yesterday from US73.23c at 8am and down from US73.53c on Tuesday. The trade-weighted index declined to 77.19 from 77.43 on Tuesday.

Tensions on the Korean peninsula escalated after a spokesman for the Korean People’s Army said in a state- ment that it was “carefully examining” plans for a missile attack on the US Pacific territory of Guam, which has a large US military base, Reuters reported.

The comments came just hours after US President Donald Trump told North Korea that any threat to the United States would be met with “fire and fury”.

Sheldon Slabbert, a trader at CMC Markets, said the kiwi was likely to stick to a US72c-to-US74c range in the short-term.

“Risk off sentiment is pretty much prevailing at this point in time,” said Slabbert. “That risk off environment is not favourable for kiwi.”

Both the kiwi and the Australian dollar were also weighed on when China’s consumer inflation unexpectedly slowed in July. Official data showed the CPI increased 1.4 per cent from a year earlier, compared with a 1.5 per cent gain in June.

Tepid inflation and soft data have increased expectations that the central bank — which previously forecast rates could begin lifting in 2019 — will now signal 2020.

Governor Graeme Wheeler will deliver his final monetary policy statement today and is widely expected to keep rates on hold at 1.75 per cent.

The kiwi was trading at ¥80.42 from ¥81.33 and at 4.8950 Chinese yuan from 4.9250 yuan. It was at

62.31c from 62.26c on Tuesday. It was at 56.34p from 56.37p and at A92.91c from A92.90c on Tuesday.

The 10-year swaps declined 2 basis point to 3.14 per cent.— BusinessDesk