Kiwi falls as greenback gains on hints at tariff 'carve-outs', ECB's inflation view

(BusinessDesk) - The New Zealand dollar fell against a broadly stronger US dollar after a White House spokeswoman hinted at exemptions to US tariffs on steel and aluminium imports and after the European Central Bank said inflation in the economic bloc remained subdued.

The kiwi dollar fell to 72.55 US cents as at 8am in Wellington from 72.91 cents late yesterday. The trade-weighted index slipped to 74.64 from 74.73.

The US dollar index gained after a White House spokeswoman said countries including Canada and Mexico may be carved out of tariffs that President Donald Trump plans to sign into law this week. The White House said exemptions would be on a case by case basis. Canada was the biggest source of US steel imports last year followed by Brazil, South Korea and Mexico, while China ranked 11th. Meanwhile, the ECB kept its deposit facility rate unchanged at -0.4 percent while removing its easing bias and ECB President Mario Draghi said inflation remained subdued. He also said Trump's tariff plans could spark a trade war.

"The USD has managed to show some broadly based support in overnight trading," said Jason Wong, a currency strategist at Bank of New Zealand, in a note. The greenback gained "as the US policy on steel and aluminium tariffs looks to be watered down, while EUR has underperformed following the ECB announcement."

The New Zealand dollar rose to 58.92 euro cents from 58.77 cents late yesterday. It declined to 76.98 yen from 77.34 yen ahead of today's policy statement from the Bank of Japan, where Governor Huruhiko Kuroda is expected to keep current monetary policy settings unchanged.

"Actual policy tweaks in terms of asset purchases or yield-curve control settings remain some way off, but words can be very powerful," said Sharon Zollner, chief economist at ANZ Bank New Zealand, in a note. "Governor Kuroda made comments earlier this week that an exit from current highly stimulatory policy settings was very unlikely in the fiscal year starting in April, and market consensus has shifted to be in line with this. Any more detailed hints about timing will move the yen and likely the NZD as well."

In New Zealand, traders will be watching today for electronic card spending for February, expected to show growth slowed to 0.1 percent from 1.4 percent in the previous month. In the US on Friday, employment data will come into focus, with expectations the US economy added 205,000 jobs last month while the unemployment rate fell to 4 percent from 4.1 percent.

The kiwi dollar gained to 93.30 Australian cents from 93.08 cents yesterday. It fell to 4.5982 yuan from 4.6118 yuan and traded at 52.55 British pence from 52.43 pence.