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NZ Dollar Weakest Among Brewing US-China Trade War

May 15, 2020 at 18:22 by Vladimir Vyun

50 and 100 New Zealand dollar billsThe New Zealand dollar was the weakest among the most-traded currencies on the Forex market today. While domestic macroeconomic data could have played a part in the decline, market analysts speculated that the major reason for the drop was the brewing trade war between the United States and China.

The Trump administration made a move to block shipments of semiconductors to China’s tech giant and the world’s second biggest smartphone maker Huawei Technologies. It will likely strain relations between the world’s two biggest economies. Analysts speculate what response China will make, naming among possible options adding major US tech companies to the unreliable entities list.

As for New Zealand macroeconomic data, the BusinessNZ Performance of Manufacturing Index dropped to 26.1 in April from 38.0 in March. Obviously, the sharp drop was a result of the coronavirus pandemic and measures to contain it as BusinessNZ’s executive director for manufacturing Catherine Beard explained:

Looking at comments from respondents, only two words stand out, namely COVID-19 and lockdown, with 89.7% of respondents outlining negative comments.

She was cautiously optimistic about the economic activity going forward, saying:

With level 3 in place since 28 April, along with the country entering level 2 on 14 May, a greater sense of normality will hopefully be present for most manufacturers during the second half of May. This should see a return to relatively stronger levels of activity. However, to what extent the sector climbs out of rock bottom will largely depend on the ability to get new orders up and running, along with revised factory floor processes for production

NZD/USD dropped from 0.5994 to 0.5932 as of 18:22 GMT today. EUR/NZD climbed from 1.8013 to 1.8221. NZD/JPY slid from 64.30 to 63.66.

If you have any questions, comments, or opinions regarding the New Zealand Dollar, feel free to post them using the commentary form below.

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