NZ dollar gains

New Zealand dollarThe New Zealand dollar gained on speculation there will be less need to raise interest rates in the US because the Trump administration is too distracted by scandals – such as the firing of the Federal Bureau of Investigation chief – to enact economy-boosting policies and inflation data has been weak.

The kiwi advanced to US69.38c as at 0800 in Wellington from US68.96c late on Wednesday.

The trade-weighted index increased to 75.21 from 74.86 on Wednesday.

Stocks on Wall Street dropped with the Standard & Poor’s 500 index down 1.7 per cent in late trading, the US dollar index, a broad measure of the greenback, fell 0.6 per cent, and the yield on 10-year US Treasuries fell 10 basis points as investors scaled back their expectations for the Federal Reserve to raise interest rates this year.

The downbeat tone came amid reports alleging Trump may have tried to influence the FBI investigation into his national security adviser Michael Flynn, days after he shared secret intelligence with Russian officials.

The Chicago Board Options Exchange’s volatility index, known as Wall Street’s ‘fear gauge’, jumped 45 per cent to 15.43.

“The combination of a potentially weaker inflation environment than previously thought and less chance that Trump’s fiscal stimulus will see the light of day has softened the outlook for Fed tightening,” Bank of New Zealand currency strategist Jason Wong said in a note.

“On most USD indices, the big rally in the USD following Trump’s surprise election in November has now been fully unwound.”

The local currency rose to A93.37c from A92.90c after Standard & Poor’s affirmed its AAA credit rating for Australia on Wednesday, while keeping a ‘negative’ outlook on the federal government’s ability to balance the books by 2020-21.

The kiwi increased to 62.20 euro cents from 62.09 euro cents. It was trading near an 11-month low as the Trump administration’s woes sapped demand for the greenback and as the election of Emmanuel Macron to the French presidency calmed investors nervous about the region’s economy.

The local currency increased to 53.52 British pence from 53.32 pence on Wednesday and dropped to 77.03 yen from 77.60 yen.

It rose to 4.7742 Chinese yuan from 4.7493 yuan on Wednesday.

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