NZ dollar gains as greenback weakens on coronavirus fears

The kiwi was trading at 63.23 US cents at 5pm.

The New Zealand dollar rose, reflecting weakness in the greenback after US equities plunged on concerns about the impact of the coronavirus and a potential oil price war between Saudi Arabia and Russia.

The kiwi was trading at 63.23 US cents at 5pm in Wellington from 62.49 cents at the same time yesterday. The trade-weighted index was at 69.96 from 69.20.

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The domestic currency peaked at 64.47 US cents in the early hours of the New Zealand morning when US equities markets were in free fall.

The greenback's slide was somewhat alleviated after US President Donald Trump said he would ask congress to cut payroll taxes and provide relief to hourly workers suffering as a result of the crisis. He would also seek to help the airline, hotel and cruise industries which are all suffering as Americans cancel travel plans.

The Democrats, which control the lower house while Trump's Republican Party controls the senate, are working on their own economic relief package.

"That's turned the currency market and equity futures around," said Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia.

After weeks of resisting such measures, playing down the seriousness of the crisis and blaming Democrats for blowing the situation out of proportion to hurt him politically, Trump told reporters "we have a very strong economy, but this blindsided the world."

A speech today by Reserve Bank governor Adrian Orr offered little, "other than to reinforce that they're on hold until March 25," Kelleher said.

That's when the central bank is next scheduled to review monetary policy. The market is speculating whether it will follow other central banks, including the Reserve Bank of Australia, the Federal Reserve and the Bank of Canada in cutting its benchmark interest rate.

Orr said the RBNZ doesn't need to use alternative monetary policy instruments but that it needs to be prepared to do so.

The latest news on the coronavirus is that more than 114,000 people around the world have been infected and more than 4,000 have died.

Italy, one of the worst-hit countries to date, has placed the entire country in quarantine, restricting travel of its 60 million people, shutting schools and universities and banning public gatherings.

The New Zealand dollar was trading at 96.11 Australian cents at 5pm from 95.81 cents yesterday. It was at 48.41 British pence from 47.77, at 55.49 euro cents from 54.73, at 65.57 yen from 64.03, and at 4.2869 Chinese yuan from 4.3307.

The bid price on the two-year swap rate rose to 0.7599 per cent from 0.7298 yesterday while the 10-year swaps climbed to 1.0150 per cent from 0.9400 per cent.