The New Zealand dollar dropped to a four-month low as US President Donald Trump unveiled his much-vaunted tax reform plans, while trade-orientated nations came under pressure on reports the US plans to quit the North American Free Trade Agreement.
The kiwi fell as low as 68.68 US cents, the lowest since Dec. 23, and was trading at 68.93 cents as at 8am in Wellington from 69.26 cents yesterday. The trade-weighted index declined to 74.88 from 75.05 yesterday.
The greenback garnered support as US Treasury Secretary Steven Mnuchin announced plans to lower personal and company taxes in an effort to stoke economic growth.
However, Mnuchin couldn't guarantee the plan would be revenue neutral, something Congressional House Speaker Paul Ryan has insisted on, meaning it might be an uphill battle to gather legislative support to pass the deal. Meanwhile, Politico reported the White House is considering signing an executive order withdrawing from NAFTA, after ordering tariffs be imposed on certain Canadian products, sapping demand for the Mexican peso.
"Markets continue to weigh up the validity of the Trump trade, with tax-cut rhetoric on one hand but growth-unfriendly anti-trade talk on the other," ANZ Bank New Zealand senior economist Sharon Zollner said in a note.
