Kiwi treads water as investors wait on US

The New Zealand dollar was little changed on the week and continues to tread water as investors wait to see if the US repeals and replaces the Affordable Care Act known as Obamacare, now viewed as a barometer ofwhether the Trump Administration can deliver on its infrastructure and tax plans.

The kiwi was trading at US70.13c at 5pm yesterday versus US70.29c at 8am and US70.10c a week ago.

The vote to dismantle the Affordable Care Act, which was previously set for Thursday, was expected to occur overnight, as US President Donald Trump and his supporters scrambled to get the necessary numbers. Markets are jittery as it is seen as a touchstone for any future legislation.

Tim Kelleher, head of institutional foreign exchange sales for ASB Bank, said if the result had come out by late on Friday New York time, when liquidity would be thin, currency markets could be highly volatile. “We could get quite a gapping market,” he said.

If Trump managed to get the legislation through, it would probably be positive for the US dollar as it boded well for future legislation, said Kelleher.

“I would have thought it would be a win for Trump and should be good for things like tax reforms and border repatriation stuff. It should be bullish for US dollars,” said Kelleher. He noted, however, that it might also benefit the New Zealand and Australian dollars as it would be quite positive for risk.

The trade- weighted index was at 76.18 from 76.33 late on Thursday. The New Zealand dollar fell to 56.15 British pence from 56.40p while it rose to A92.08c from A91.91c, fell to ¥ 78.04 from ¥ 78.37 and declined to 4.8345 yuan from 4.8482 yuan. It eased to 65.12c cents from 65.25c.

The two- year swap rate rose 1 basis point to 2.30 while the 10- year swaps were unchanged at 3.41 per cent.