Kiwi falls as Trump spikes stimulus deal

The New Zealand dollar fell almost 1 US cent after President Donald Trump threw cold water on the prospect of passing fiscal stimulus before the election, causing risk assets to fall.

Wednesday, October 7th 2020, 6:01PM

by BusinessDesk

The kiwi dollar, which had been trading above 66.40 US cents, dropped as low as 65.76 around 8am as Trump announced he was directing Republicans to withdraw from negotiations for a pandemic fiscal relief bill.

“Equities came off and we came off with them, after those Trump comments,” said Simon Greig, a treasury dealer at Forex.

Greig said it was an unusually big move for that time of the morning in a week where the market had been fairly stable.

The kiwi dollar was trading at 65.88 US cents at 5pm in Wellington, down from 66.47 cents yesterday. It would take reasonably bad news to push the currency below 65.00, Greig said.

The trade-weighted index was at 71.10 at 5pm, from 71.51 yesterday. The kiwi traded at 92.55 Australian cents up from 92.46 cents, 69.63 yen from 70.09 yen, 56.16 euro cents from 56.37 cents, 51.13 British pence from 51.17 pence, and 4.4731 Chinese yuan from 4.5132 yuan.

New Zealand equities started the day weaker, discouraged by the negative lead from Wall Street, but rallied throughout the day as utilities attracted cautious buyers.

The S&P/NZX 50 Index rose 41.13 points, or 0.3 percent, to 12,016.15. Within the index, 29 stocks rose, 13 fell and eight were unchanged. Turnover was $153.8 million.

Greg Smith, head of research at Fat Prophets, said investors may be seeing Trump’s comments as just brinksmanship and expecting stimulus to still be passed.

“The US Fed is calling for more stimulus and you would think the Trump administration couldn’t afford to be seen hurting the economy by refusing to do a stimulus deal,” he said.

“If there was going to be no deal at all, you’d expect the reaction from the market to be a lot worse.”

Meridian Energy led the market higher, rising 4.4 percent to $5.26, and Vector rose 3.2 percent to $4.25.

Smith said the global risk-off mood might have encouraged a “flight to safety” with investors buying utilities with safe dividend yields.

Chorus also rose 1.4 percent to $8.84, Infratil was up 1.1 percent at $5.135 and Contact Energy climbed 1 percent to $7.27.

Australia & New Zealand Banking Group rose 2.8 percent to $19.65 and Westpac Banking Corp was up 2.6 percent to $19.15 after the Australian federal government announced a market-friendly budget which included tax cuts, employment programmes and big infrastructure spending.

Vista Group International posted the day’s biggest decline, dropping 5.8 percent to $1.45.

The reopening of movie theatres worldwide has taken a step backwards as Cineworld announced it would shutter hundreds of theatres after Metro-Goldwyn-Mayer Studios pushed back the release of its upcoming James Bond thriller.

Fisher & Paykel Healthcare fell 1.4 percent to $33.30 and A2 Milk Co rose 0.1 percent to $15.50. Air New Zealand fell 1.3 percent to $1.54.

Vital Healthcare Property Trust was put on a trading halt at $1.45 after its manager announced it would seek to raise $150 million of new equity to fund developments and the potential purchase of another metropolitan hospital.

Tags: Market Close