New Zealand Dollar weakens Against US Counterpart Following Trump Tweet on Dairy Industry

The New Zealand dollar dropped on Wednesday against its US peer to continue a steep decline that began on April 24. Today’s declined followed remarks made by US President Donald Trump on Twitter regarding the US dairy industry yesterday.

Trump’s tweet said that Canada increased the difficulty that US dairy farmers in Wisconsin and other border states face when competing with the prices of milk and dairy products imported from Canada. The tweet followed a decision by US Department of Commerce that imposed new duties on Canadian softwood lumber exports to the United States. The new duties average 20% and will come into effect next week.

Even though the move targeted the northern neighbor of the United States, investors in other economies that depend on commodities and have close trade ties with the world’s biggest economy became concerned. Trump possesses a protectionist view of the US trade relationships and had previously promised during his election campaign to renegotiating the North American Free Trade Agreement and other trade deals.

New Zealand’s dairy industry, which is valued $8.4 billion and produced 21 billion liters of milk in 2015, ranks the country as the eighth largest dairy producer and the biggest dairy exporter in the world. The latest threat from Trump to the Canadian dairy industry means that the US president may soon eye dairy imports from New Zealand as well.

Looking ahead, traders will be anticipating New Zealand’s trade balance and building permits data for March that is due to be released tomorrow. Analysts expect the trade deficit to fall to 3.607 billion on a yearly basis from 3.790 billion in February, while building permits might continue to rise in March following two months of gains.

NZD/USD traded at 0.6886 as of 19:15 GMT on Wednesday from 0.6871 at 16:40 GMT, the pair’s lowest level since December 23. NZD/USD began trading today at 0.6946.

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