NZ dollar steady as geopolitical tensions ease

Donald Trump responded to an Iranian attack on US forces in Iraq with sanctions, not further violence.

The New Zealand dollar was largely steady as geopolitical tensions between Iran and the US eased further.

Markets were cheered after US President Donald Trump responded to an Iranian attack on US forces in Iraq yesterday with sanctions, not further violence. Iran also offered no immediate indication of further retaliation. Its attack had followed the US killing of Iranian General Qassem Soleimani in Iraq last week.

"We are in a bit of a reprieve," said Martin Rudings, senior dealer foreign exchange at OMF.

The kiwi was trading at 66.48 US cents at 5pm in Wellington from 66.43 cents the same time yesterday. The trade-weighted index was at 72.91 from 72.87 yesterday.

Ruding said he was surprised the relief rally didn't push the kiwi higher but said a firmer US dollar was prevailing.

"It could have another look down even though the risk-off scenario has been diluted somewhat," he said.

The kiwi remained firm against the Australian dollar, despite better-than-expected trade data across the ditch.

It was trading at 96.70 Australian cents at 5pm, from 96.63 cents late yesterday.

Australia's November trade balance was a A$5.8 billion surplus versus the A$4.1 billion surplus expected, reflecting a solid rise in export values.

Ben Udy, Australia and New Zealand economist for capital economics said, however, the weakness in imports "suggests domestic demand is set to remain subdued."

Australia, meanwhile, is bracing as authorities issued new forest fire warnings and evacuation notices across southeast Australia, Reuters reported.

Authorities have said the blazes will continue to burn, posing extreme danger at times of high temperatures and winds until the country experiences significant rainfall.

The official weather agency on Thursday confirmed fears that there was no sign of that happening in the next few months.

Rudings said markets will now be focused on US non-farm payrolls data due overnight Friday, particularly after private payroll growth ended 2019 on a strong note. Economists are expecting tomorrow's report to show the US economy added another 160,000 jobs in December, according to CNBC.

The New Zealand dollar was trading at 72.58 yen from 72.87. It was at 50.72 British pence from 50.57 late yesterday, at 59.81 euro cents from 59.54, and at 4.6057 Chinese yuan from 4.6128.

The two-year swap rates eased to a bid price of 1.1629 per cent from 1.1637, while 10-year swaps rose to 1.6325 per cent from 1.61.