The kiwi was trading at 64.61 US cents at 5pm. Photo / 123RF
The New Zealand dollar was little changed, hoisted up from its lows after the Reserve Bank of Australia came out with surprisingly strong GDP forecasts.
However, the market remains consumed with ongoing concern about the economic impact of government efforts to try to contain the coronavirus and, in New Zealand's case, prevent it from arriving on these shores.
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The kiwi was trading at 64.61 US cents at 5pm in Wellington from 64.63 at the same time yesterday while the trade-weighted index was at 71.58 points from 71.65. The currency had been at 64.50 US cents just before the RBA announcement.
The domestic currency fell to 96.22 Australian cents from 96.53 yesterday after the RBA forecast 2.8 per cent economic growth this year and 3 per cent the next, as well as leaving its cash rate unchanged.
"The RBA was quite upbeat and the market reacted because it was short going into the statement," said Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia.
While the RBA's statement did mention Australia's bushfires and the impact of the coronavirus, it seemed to suggest these would have only a temporary impact on growth.
"I don't think anybody thinks the fundamentals have changed," Kelleher said.
As yet, there no confirmed coronavirus cases in New Zealand and the government plans to quarantine those about to be evacuated from Wuhan on a government-chartered Air New Zealand flight tomorrow.
But in China, the number of those infected and the number of deaths continue to climb – more than 20,000 have been reported infected and the number of deaths are at least 425. Hong Kong has also reported its first death, although the 39-year-old man is believed to have had an underlying condition.
But industries from tourism to forestry and education in New Zealand are starting to report business disruption as a result of the outbreak – that's hardly surprising since China is our largest trading partner while our second-largest, Australia, also counts China as its largest trading partner.
Philip Poppe, managing director of advisory firm Forex, said the coronavirus is likely to continue dominate trading in currencies, equities, bonds and commodities globally.
One likely end to the situation could be if a vaccine is developed, as happened with the announcement of the antiviral Tamiflu medication during the SARS epidemic in 2003, Poppe said.
"Once the vaccine was available, everyone just got on with life."
But the coronavirus outbreak is still getting worse and "you would have to say the markets are running with it."
While the government could be accused of over-reacting, "the government's at greater risk of being accused of not doing enough," Poppe said.
Although there have been no confirmed cases here, "I would imagine there's a lot of work being done behind the scenes to try and keep it that way."
Traders in NZ dollars will be focused on the outcome of the latest Global Dairy Trade auction overnight. Kelleher said CBA is forecasting a 7 per cent drop in the headline index. That index rose in each of the last two auctions and gained 15 per cent in calendar 2019.
The New Zealand dollar was at 49.70 British pence from 49.11, at 58.44 euro cents from 58.31, at 70.22 yen from 70.13 and at 4.5239 Chinese yuan from 4.5339.
The two-year swap rate had a bid price of 1.0729 per cent from 1.0620 yesterday while 10-year swaps were at 1.3825 per cent from 1.3700.
The council has also been served with judicial review proceedings.