The New Zealand dollar gained as investors welcomed an agreement on the regional Asia-Pacific trade and investment pact, while growing US protectionism weighed on the greenback.
The kiwi dollar rose to 73.60 US cents as at 5pm in Wellington from 73.43 cents at 8am and 73.22 cents yesterday. The trade-weighted index gained to 75.43 from 75.21 yesterday.
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The local currency got a boost from news negotiators finalised the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership - or CPTPP - agreement in Tokyo on Tuesday with the 11 nations in the trade pact due to sign it in Chile on March 8.
That put it at odds with the US, where President Donald Trump announced new tariffs on some imported goods and stoking fears about the global trade environment, and adding to the greenback's negative outlook against a backdrop of low market volatility, higher global growth and increased appetite for risk.
"The kiwi's strong performance came after news that New Zealand, along with 10 other nations, has agreed to the new formation of the Trans-Pacific Partnership," said OFX Group in a note.
ANZ Bank New Zealand senior economist Phil Borkin said "any signing of a free trade agreement is a positive," in particular after nerves yesterday when Trump raised tariffs on imports of washing machines and solar panels, raising fears about the White House's protectionist attitude.
However, the kiwi's strength is "really just a continuation of a US dollar weaker theme ... the US dollar cannot buy a friend at the moment," he said.
Looking ahead, Borkin said the biggest risk for the kiwi will be tomorrow's fourth-quarter inflation data. Economists expect the consumers price index rose 0.4 per cent in the three months ended December 31, for an annual increase of 1.9 per cent, according to the median in a poll of 13 economists surveyed by Bloomberg.
"A softer CPI number could certainly knock the kiwi off its perch," said Borkin.
The kiwi fell to 80.92 yen from 81.10 yen yesterday. The local currency rose to 91.99 Australian cents from 91.66 cents yesterday and gained to 4.7026 Chinese yuan from 4.6842 yuan. It increased to 52.43 British pence from 52.36 pence yesterday and traded at 59.76 euro cents from 59.73 cents.
New Zealand's two-year swap rate fell 1 basis points to 2.22 per cent while the 10-year swaps fell four basis points to 3.25 per cent.