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Home / Business / Roger J Kerr's questions about the American dollar continue to be a safe haven currency, with the financial and investment markets now seeing the trade wars directly damaging the US economy

Roger J Kerr's questions about the American dollar continue to be a safe haven currency, with the financial and investment markets now seeing the trade wars directly damaging the US economy



Over the past 18 months, since US President Donald Trump has been following the trade with China, the foreign exchange market has generally been negative and New Zealand.

The Kiwi dollar has depreciated against the USD as it has been financed by the global financial markets

Kiwi dollar downtrend against the USD has been punctuated with two periods of NZD recovery and strength: –

  • From Lows of 0.6450 in October 2018, the Kiwi dollar is estimated to rise to the 0.6800 / 0.6900 area by until March 2019. NZ GDP growth data and rising commodity prices. The US Federal Reserve also said: "Increasing their interest rate in January."
  • The Kiwi so bounced up again from below 0.6500 to above 0.6750 in June when global economic risks subscribed after President Trump and Xi Jinping shook hands at the G20 summit meeting in Osaka and a pathway to end the trade was possible.

However, the recent fall of 0.50% OCR cut by the RBNZ earlier this month and the trade was intensifying last week with tit-for-tat retaliation measures between China

Significantly for the future future direction of the NZ dollar, what is different today and the other 1

8 months is the financial and investment markets are now seeing the trade wars directly damaging the US economy.

The Dow Jones share market index plummeted 623 points last Friday 23 August when Trump ordered US companies to pull out China in response to China announci

The US dollars in response to the trade are escalating, they now see much greater risk of the US economy headed for recession

The EUR / USD exchange rate jumped up $ 1.1050 to $ 1.1150 on the trump "tweetstorm" aimed at China and Fed Chair Jerome Powell last Friday. The trump's trade is now sending the US economy down and defending its entire misguided purpose of protectionist trade policies.

Further USD weakness to above $ 1.1200 against the Euro this week should confirm that the FX markets now see the trade as USD negative. Therefore, continuing NZ dollar weakness is not guaranteed in an environment of a weaker US dollar against the major currencies.

Federal Reserve now offers more interest rates cuts

At the last US Federal

Following Jerome Powell's speech to the world's central bankers at Jackson Hole last Friday, there is no doubt the Fed wants to see the global

Trump seeks to make Powell the scapegoat for the US economy as it has too slow to reduce interest

Trump's trade was as the real reason for the US economy slowing.

Mr Powell has now become a major new challenge s in dealing with a global economic slide caused by the trade wars. It now requires weaker than expected US economic and economic data to come out of favor.

Luckily, the Fed said they would not pay more than 2.00%, so (unlike other economies

The next US Non-Farm Payrolls employment figures for the month of August on Friday 6 September will be keenly anticipated by the forex markets. 200,000 for the month confirms that the downturn (due to import tariffs) has spread to the opposite of services / retail economy. Lower US equity markets ahead of this date may be signaling this slowdown in the US economy anyway.

A "weaponized" Yuan may no longer be needed if the USD falls by itself

Over recent The Chinese exchange rate deliberately weakened the US dollar exchange rate against the USD as a retaliatory measure against Trump's tariffs.

A weaker Yuan keeps Chinese exporters into the US competitive and negate the impact of the tariffs on their financial performance.

19659002] Trump's trade was

The USD / CNY exchange rate has dropped by 6% from 6.7000 to 7.0950 over the last six months.

The NZD and AUD do track the Aussie economic data.

A weakening USD on the back of much more aggressive

However, the trade fair has been held in a state of emergency.

However Trump is convinced his stance has back-fired on him, the Yuan can return to 6.7000 and lift the Kiwi and Aussie dollars upwards again.


Roger J Kerr is Executive Chairman of Barrington Treasury Services NZ Limited. He has written commentaries on the NZ dollar since 1981.


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