NZ dollar see-saws on US-China tensions, trans-Tasman bubble plans

The kiwi was trading at 60.24 US cents at 5pm. Photo / 123RF

The New Zealand dollar dropped from Friday's close before rising on optimism that a trans-Tasman bubble with Australia may allow travel between the two countries again.

That rally was short-lived, with the currency heading south after Prime Minister Jacinda Ardern poured cold water on the notion, telling the nation not to expect anything to happen on that front in the next couple of weeks.

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The kiwi was trading at 60.24 US cents at 5pm in Wellington, down from the day's high at 60.42 cents but up from a low of 60.09 cents. It closed on Friday at 60.64 cents in New York and 60.89 cents locally. The trade-weighted index was at 68.21 from 68.71.

The domestic currency continued its decline after the local close on Friday "for a multitude of reasons, risk-off themes present over the weekend," said Mike Shirley, a dealer at Kiwibank.

They included US President Donald Trump and his secretary of state, Mike Pompeo, accusing China of having allowed the Covid-19 virus to escape from a Wuhan laboratory, despite intelligence officials having said last week that the virus came from natural transmission and was neither man-made nor genetically modified.

Pompeo said there was "enormous evidence" that the virus originated in a Chinese laboratory

Pompeo's comments follow Trump saying that he was privy to evidence that the virus began in a Wuhan laboratory but that he wasn't permitted to share that evidence – as president, Trump has the power to declassify any information he chooses.

And then Trump upped the ante, accusing China of a cover-up and saying that imposing further tariffs on China would be the "ultimate punishment."

That saw the kiwi drop when trading began today, Shirley said, adding that Trump had returned to last year's playbook of tariffs because it worked for him in the past.

"Then the sun came out about lunchtime with talk of Prime Minister Ardern heading across the Tasman – I don't know if that's physically or virtually – to discuss a trans-Tasman bubble," he said.

Ardern has accepted Australia's invitation for her to join the federal government's cabinet meeting by phone tomorrow to discuss Covid-19. The meeting will include Australian Prime Minister Scott Morrison and all Australia's state and territory premiers or chief ministers.

At her regular media conference late this afternoon, Ardern said a trans-Tasman bubble won't happen "in the very, very near short term," but that both she and Morrison have similar timelines they wanted to work to.

And Ardern said she wanted to ensure New Zealand's gains from the lockdown have been locked in before any opening of the borders.

The New Zealand dollar was trading at 94.29 Australian cents from 94.17 cents at 5pm on Friday. It was at 48.40 British pence from 48.44, at 55.06 euro cents from 56.60, at 64.28 yen from 65.21 and at 4.2524 Chinese yuan from 4.2988.

The bid price on the two-year swap rate closed at 0.1450 per cent from 0.1700 per cent on Friday and 10-year swaps were at 0.6775 per cent from 0.7025.