The New Zealand and Australian dollars have been caught in the crossfire by a surprise worsening of trade relations between the United States and China.
Just when they thought US-China trade tensions were dissipating, currency traders were confronted with news this morning that the US planned to slap an extra US$200 billion ($293.4b) of tariffs on imports from China, putting upward pressure on the US dollar and downward pressure on the Kiwi, the Aussie and several other currencies.
"The trade war headlines had faded over the last few days, so to be hit by this was a bit of a surprise," Westpac senior markets strategist Imre Speizer said.
"It just keeps coming," he said. "And I think it will keep the market on edge," Speizer said.
Phil Borkin, senior macro strategist at ANZ, said the markets were caught off guard by the suddenness and the "very aggressive" step taken by the United States.
"We have seen the Kiwi, the Aussie and the emerging market currencies put on the back foot again," Borkin said.
"I think that it's going to bubble away the background for a while, and all eyes will be on how China responds," he said.
"You would have to say that there is a risk that it escalates further," Borkin said.
The kiwi has sold down about half a US cent to a low for the day of US68.08 and the Aussie by a similar amount.
The local currency has been on a downward path over the last six months, driven by suggestions that economic growth is moderating and an outside chance that the Reserve Bank's next move in its official cash rate could be a cut.
In that time the US dollar has been stronger, driven by improved prospects for the US economy, the likelihood of more rate hikes by the US Federal Reserve, and the "flight to quality" safe haven status that the greenback has in times of international turmoil.
Since the start of the year, the Kiwi has dropped by just under US5c, or 6.6 per cent.
The news threw US-China trade war worries back into the spotlight just days after Washington imposed 25 per cent tariffs on US$34 billion of Chinese imports, and Beijing responded immediately with matching tariffs on the same amount of US exports to China.
Asian share markets were broadly lower in response to the trade news, although the local share market finished flat.
The United States complains that China uses predatory practices in a push to challenge American technological dominance.
Chinese tactics, the administration says, include outright cybertheft and forcing US companies to hand over technology in exchange for access to the Chinese market.
The initial US tariff list focused on Chinese industrial products in an attempt to limit the impact on American consumers. By expanding the list, the administration is beginning to hit products that US households buy, including such things as electric lamps and fish sticks.
"Tariffs on US$200b in Chinese products amounts to another multibillion-dollar tax on American businesses and families," said Scott Lincicome, a trade lawyer and senior policy analyst for the group Republicans Fighting Tariffs.
"Given China's likelihood of retaliation, it's also billions worth of new tariffs on American exporters."
Members of Congress are increasingly questioning Trump's aggressive trade policies, warning that tariffs on imports raise prices for consumers and expose US farmers and manufacturers to retaliation abroad.
"Tonight's announcement appears reckless and is not a targeted approach," Senate Finance Chairman Orrin Hatch, said in a statement.
"We cannot turn a blind eye to China's mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy," he said.
- With AP