NZ Dollar Falls As Trump's Import Tariff Threat Looms

(RTTNews) - The New Zealand weakened against other major currencies in the Asian session on Tuesday, as traders remain cautious amid raising fears of a brewing global trade war and its potential impact on the global economy. China's retaliatory tariffs on U.S. goods are also set to take effect later in the day.

The latest tariff threat comes after U.S. President Donald Trump said last Friday he plans to announce reciprocal tariffs on many countries this week, with the U.S. imposing tariffs on imports equal to the rates imposed on American exports.

The NZD's decline is partly attributed to growing expectations that the Reserve Bank of New Zealand (RBNZ) will announce a third consecutive supersized rate drop later this month. The odds of the RBNZ delivering a 50-basis point (bps) rate cut on February 19 are almost 92%, according to market pricing.

Later in the day, the Federal Reserve (Fed) Chair Jerome Powell's semi-annual testimony to the U.S. Congress is largely awaited by the traders. Strong economic statistics and the Fed's reluctance to lower rates in March could make the testimony and the Q&A sessions that follow extremely volatile.

In the Asian trading today, the NZ dollar fell to a 1-week low of 0.5629 against the U.S. dollar, from yesterday's closing value of 0.5634. The kiwi is likely to find support around the 0.55 region.

Against the yen and the euro, the kiwi slid to 4-day lows of 85.42 and 1.8297 from Monday's closing quotes of 85.52 and 1.8283, respectively. The kiwi may test support near 84.00 against the yen and 1.85 against the euro.

The kiwi edged down to 1.1136 against the Australian dollar, from yesterday's closing value of 1.1128. The next possible downside target for the kiwi is seen around the 1.12 region.

Looking ahead, Canada building permits for December and U.S. Redbook report are slated for release in the New York session.

At 10:00 am ET, the Federal Reserve (Fed) Chair Jerome Powell's will testify before the Committee on Banking, Housing, and Urban Affairs.