Trade deal hope buoys dollar to five-month high

The New Zealand dollar climbed to a fivemonth high, buoyed by the imminent signing of a preliminary trade deal between the US and China and strong fundamentals for the local economy.

The kiwi was trading at 66.79 US cents at

5pm in Wellington, from 66.69 cents yesterday and 66.32 cents on Tuesday before the local two-day Christmas holiday break. The trade-weighted index rose to 73.31 from

73.20 yesterday and 72.95 points on Tuesday.

The New Zealand dollar has gained almost 4 per cent against the US dollar this month, boosted by strong dairy prices, a planned boost to government infrastructure spending, improved business confidence and stronger than expected third-quarter GDP data last week.

Mitchell McIntyre, a trader at XE, said the kiwi’s latest gains reflect a trend under way since the Reserve Bank surprised the market on November 13 by holding rates rather than cutting.

Equity markets have rallied strongly in recent weeks as the US and China neared an interim deal that could end the trade war US President Donald Trump kicked off in April

2018 by imposing punitive tariffs on Chinese goods.

Yesterday, China’s Commerce Ministry said it is working closely with US officials to complete the preliminary trade agreement.

On Tuesday, Trump said the deal was “done” and only required translating before he and President Xi Jinping would sign it.

The New Zealand dollar was at 96.02 Australian cents from 96.01 cents yesterday. It was at 51.35 British pence from 51.32, at

60.05 euro cents from 60.08, at 73.08 yen from 73.11, and at 4.6745 Chinese yuan from

4.6633.