NZ dollar holds near 6-month high amid US-China tensions

The kiwi was trading at 66.74 cents at 5pm in Wellington. Photo / Getty Images

The New Zealand dollar held near its six-month high as mounting tensions between the US and China unnerved traders.

The kiwi rose as high as 66.89 US cents overnight, and was trading at 66.74 cents at 5pm in Wellington from 66.45 cents yesterday. The trade-weighted index was at 72.95 from 72.58 yesterday.

Foreign exchange markets have largely been tracking equities in recent months as massive money printing programmes and near-zero interest rates remove any yield differential that would typically make one currency more attractive than another.

That's seen traders follow broader market sentiment, making positive covid-19 trials, new virus outbreaks, and tense global relations more influential than usual in driving currencies.

The mounting tensions between the US and China weighed on investor sentiment after the US ordered China to close its consulate in Houston, Texas – something Beijing described as "political provocation" – accusing Asia's largest economy of stealing intellectual property.

China responded in kind, with the South China Morning Post reporting that Beijing plans to force the US to close its consulate in Chengdu.

"It's not the biggest one, but it's been there since 1985 so I think it's symbolic," said Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia.

"If this stoush continues, then the risk is risk-off in equities, and in that case, that should put a cap on the kiwi."

Kelleher said the kiwi looks "toppy" around 67 US cents, having failed to break above it a couple of times.

The kiwi rose to 4.6750 Chinese yuan from 4.6321 yuan yesterday.

Local merchandise trade data tomorrow may attract some attention, with NZ's economic outlook comparing favourably to its peers. And while Infometrics today said near-term economic outcomes will be better than initially feared, it warned the government's wage subsidy has served its purpose and is now simply delaying inevitable job losses.

The kiwi traded at 93.36 Australian cents from 93.09 cents yesterday, 71.52 yen from 71.01 yen, 57.63 euro cents from 57.58 cents and 52.39 British pence from 52.23 pence.

The bid-price on the two-year swap rate was 0.2075 percent from 0.2025 percent yesterday; the 10-year swaps were at 0.6850 percent from 0.6800 percent.