The kiwi dollar fell as the prospect of incoming US President Donald Trump calling on emergency powers to introduce his tariff plans accelerated the pace of already rising bond yields.
The New Zealand dollar fell to 56.03 US cents at 7am in Auckland from 56.33 cents yesterday as the yield on US 10-year Treasuries rose above 4.7% for the first time since April and UK gilt yields surged as high as 4.82%, the highest since 2008. The kiwi rose to 45.38 British pence from 45.14 pence yesterday.
New Zealand’s 10-year government bond yields rose yesterday to 4.55%. The NZX-listed Smart Global Bond exchange traded fund is down 0.2% so far this week, closing at $3.12 yesterday.
Government bond yields had already been rising around the world as stronger US economic data added to the view that the Federal Reserve won’t cut interest rates as aggressively as earlier thought.
That stepped up a pace after CNN reported that Trump is considering declaring a national economic emergency to impose widespread tariffs, which would give the incoming administration scope to build a programme without having to make the typical national security arguments.
Companies have been mulling over how to respond to an as-yet unknown tariff regime, with the likes of Fisher & Paykel Healthcare pondering the impact on its Mexican manufacturing facilities.
On the job
Investors are waiting for US employment figures on Friday, which may shed further light on the strength of the world’s biggest economy and its influence on the Fed’s path to lower interest rates.
Australian inflation data yesterday showed slowing consumer price increases across the Tasman, while November retail sales figures are due to be released today. ASX futures are pointing to a 0.9% decline across the Tasman today.
Stocks in the US and Europe were choppy with the S&P 500 index down 0.2% in afternoon trading, with Wall Street closed on Thursday to mark the death of President Jimmy Carter. while the UK’s FTSE 100 edged up 0.1% and Germany’s DAX 30 dipped 0.1%.
London-listed Shell slipped 1.4% after the energy giant warned its integrated gas division faces significantly lower earnings in the fourth quarter and cut its forecast production for its oil and gas units.
Brent crude oil futures were down 1% at US76.25 a barrel at 7am in Auckland, with US inventories falling last week.
Meanwhile, European wind farm developers such as Denmark’s Orsted and Germany’s RWE were weaker after US President-elect Donald Trump said he would try to make sure no windmills are built during his administration. New Zealand infrastructure investor Infratil counts US renewable energy firm Longroad Energy as its third biggest investment.
Reporting by Paul McBeth. Image from CHUTTERSNAP on Unsplash.