© Reuters. Australian dollar slips on renewed trade war fears, NZ$ firm
By Swati Pandey
SYDNEY, March 22 (Reuters) – The Australian dollar slipped from early highs on Thursday as renewed worries of a global trade war gripped investors ahead of a U.S. tariff announcement on Chinese imports, while the New Zealand dollar held on to overnight gains.
The feared duties, expected later in the day, are aimed at curbing what the United States says is theft of its intellectual property and technology. The size and scope of the tariffs are not known yet. measures could trigger retaliation from Beijing and any subsequent trade war would severely disrupt global growth which is seeing its first synchronised upturn in years.
Open, export-heavy economies such as Australia, New Zealand and Canada are particularly vulnerable.
These concerns sent the Australian dollar AUD=D4 down 0.3 percent to $0.7743 in afternoon trade from as high as $0.7793 earlier in the day.
The and its New Zealand cousin rallied overnight after the U.S. Federal Reserve wrong-footed hawks by maintaining its future rate projection, or ‘dot plot’ at three hikes this year against bets of four increases.
The kiwi was last up 0.1 percent at $0.7236, having risen about 0.7 percent overnight to $0.7245.
Market attention has now shifted to the next major risk event, analysts said.
“President Donald Trump’s planned tariff announcement won’t be positive for global trade, and that is potentially very negative for Australia, and all other trading nations,” Sean Keane of Triple T Consulting wrote in a note prepared for Credit Suisse (SIX:).
China is Australia’s No.1 trading partner and the Aussie is often seen as a liquid proxy for China trades.
Earlier, Australia official data showed another month of solid employment growth in February although the jobless rate ticked higher as more people went looking for work – a paradox that is weighing on the outlook for wages growth and inflation. Australian Bureau of Statistics said a net 17,500 new jobs were added in February, the 17th straight month of job gains and the longest run on record. Yet the unemployment rate nudged up to 5.6 percent, from 5.5 percent in January.
“There is still likely more spare capacity in Australia’s labour market compared with other major economies and hence we still don’t see a large lift in wages in the near-term,” said UBS economist George Tharenou.
“Overall, we still see the Reserve Bank on hold in 2018.”
The Reserve Bank of Australia (RBA) has held rates at an all-time low of 1.50 percent since August 2016. the Tasman Sea, New Zealand’s central bank held cash rates at a record low 1.75 percent on Thursday and signalled steady policy for a long time to come – in sharp contrast to the U.S. Federal Reserve’s tightening track. Zealand government bonds 0#NZTSY= edged up, sending yields down about 2 basis points at the long end and 3 ticks at the long end.
Australian government bond futures were mixed, with the three-year bond contract YTTc1 down 2.5 ticks at 97.80. The 10-year contract YTCc1 added 2.5 ticks to 97.31.
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