Trump a key source of dollar volatility

Harbinger of volatility? Kiwi importers and exporters think so. Photo / AP

US President Donald Trump is expected to be the main driver of currency volatility over the next 12 months according to Kiwi importers and exporters.

ASB's latest Kiwi Dollar Barometer found that Trump will be the key driver of dollar movement, while revealing a new popularity in the Chinese yuan.

The Barometer surveys 430 businesses that turn over at least $1 million a year.

European elections took second place as a source of concern over the dollar, while Brexit was at number three. There was little concern over local politics, with only 5 per cent of respondents naming the New Zealand election as a cause for concern.

Firms with a turnover of $150m or more placed European elections as the biggest cause of foreign exchange volatility, reflecting their exposure to a larger number of countries. Conversely, the New Zealand election was a higher concern for smaller firms showing their reliance on local stability and comparatively fewer coping resources.

The Barometer also found higher-than-expected trading in the Chinese currency with 54.5 per cent of firms saying they trade it. Of the firms that said they did not trade in Chinese currency, 36.7 per cent expected they would within the next two years.

Phone and internet were the primary means of conducting foreign exchange transactions, with the general rule being the larger the firm, the more likely they were to use the internet.

Smaller firms were more likely to use the phone, and had a higher number of transactions take place in person or through mobile apps than their larger counterparts.

Finally, the Barometer showed New Zealand importers and exporters expect the dollar to gently depreciate against the United States dollar over the next 12 months. Respondents were more optimistic than ASB in their predictions, with importers holding the most upbeat view of the dollar.