NZ dollar headed for weekly gain

The New Zealand dollar is headed for a 0.8 per cent weekly gain after markets were cheered by news that the US and China may return to the negotiating table.

The kiwi traded at US65.85c yesterday versus US65.53c on Thursday. It was at US65.33c last Friday in New York. The tradeweighted index was at 71.42 versus 71.18 late on Thursday.

Markets were cheered by news US Treasury Secretary Steven Mnuchin invited his Chinese counterparts back to the table even though President Donald Trump tempered market expectations, tweeting the US is “under no pressure to make a deal with China”. The trade tensions have weighed on currencies like the kiwi, given New Zealand’s dependence on exports.

Tim Kelleher, head of institutional foreign exchange sales at ASB Bank, said the risk is that the kiwi continues to “squeeze [higher] given the positioning”. He noted that the market is quite long US dollars, which could mean the kiwi gets a lift if that positioning reverses at all. Long positioning is when a trader bets an asset will lift in value.

Domestically, the next big event is the second-quarter gross domestic product data, due next Thursday, which may be stronger than the central bank anticipates.

Second-quarter gross domestic product grew 0.8 per cent for an annual gain of 2.5 per cent, according to a Bloomberg survey of

16 economists. The Reserve Bank forecast

0.5 per cent quarterly growth.

The kiwi rose to 4.5124 yuan from 4.4868 yuan on Thursday. It increased to A91.50c from A91.15c and was at 56.30 euro cents from 56.33 cents. It traded at 50.19 British pence from 50.23 pence. The kiwi rose to

73.64 yen from 73.03 yen. New Zealand’s two-year swap rate was unchanged at 1.97 per cent, while 10-year swaps rose 1 basis point to 2.82 per cent.