Mexican standoff fails to dent dollar

The New Zealand dollar was little changed as traders grappled with increasing global uncertainty, exacerbated by United States President Donald Trump slapping — via tweet — a 5 per cent tariff on all Mexican goods entering the US.

The kiwi was trading at US65.10c at

5:05pm yesterday from US65.06c at 8:10am. The trade-weighted index rose to 71.84 points from 71.80.

Trump’s move casts further doubt on the renegotiated NAFTA trade deal between the US, Mexico and Canada that is still awaiting approval by Congress.

The US and China are already engaged in an escalating trade war that has been unsettling markets for months.

Mike Houlahan, a senior dealer at XE, says it’s month’s end and “I guess there’s a lot of uncertainty in the world. People are not quite sure which way to move. They’re not quite sure what happens next.”

On top of the trade concerns, the market is starting to focus on the likelihood that the Federal Reserve may cut interest rates.

The Fed’s preferred inflation measure is the Personal Consumption Expenditure Index which climbed 1.6 per cent in the year ended March. Figures for April were due overnight.

“If that’s on the soft side, you will see more people thinking the US will cut interest rates and that should support the New Zealand dollar — that’s why we’ve got this stalemate at the moment,” Houlahan says.

In addition, the Reserve Bank of Australia is widely expected to cut its cash rate next Tuesday.

The New Zealand dollar was at A94.10c from A94.14c, at 51.63 British pence from

51.59, at 58.50 euro cents from €58.42c, at

70.93 yen from ¥71.26 and at 4.4970 Chinese yuan from 4.4899.