Markets remained on edge after China's Ministry of Commerce said it was ready to retaliate after news the US was looking at imposing even higher tariffs on the Asian nation than previously indicated. The kiwi is weighed down by trade war jitters as China is New Zealand's largest trading partner and any slowdown will impact the export-led economy.
Investors are now waiting for US jobs data with economists tipping nonfarm payrolls increased by 190,000 in July after advancing by 213,000 positions in June. A strong number will add to the view the US economy is in good health and the Federal Reserve will keep lifting interest rates.
Given the US dollar is already broadly stronger "if we get a good number there's no reason the dollar won't have another crack (higher) … so its set up for kiwi to be weaker," said Martin Rudings, senior dealer foreign exchange at OMF.
Rudings said the New Zealand dollar "looks vulnerable" against the Aussie, in particular after slightly stronger-than-expected retail sales data across the Tasman. Retail sales rose 1.2 per cent in the second quarter versus an expected 0.8 per cent rise. The kiwi fell to 91.29 Australian from 91.77 cents yesterday.
Once the payrolls data is out of the way, markets will shift their focus to next Thursday's rate decision from New Zealand's Reserve Bank. All 16 economists polled by Bloomberg expect the official cash rate to remain on hold at a record low 1.75 per cent and the median of 11 expect rates to lift to 2 per cent by the third quarter of 2019.
The local currency traded at 4.6245 Chinese yuan from 4.6179 yuan. It was at 51.69 British pence from 51.71 and at 58.06 euro cents from 58.16 cents yesterday. The kiwi fell to 75.18 yen from 75.62 yen.
New Zealand's two-year swap rate was down 2 basis points at 2.11 while 10-year swaps decreased 1 basis point to 3.04 per cent.
