- NZD finds takers as New Zealand raises infrastructure spending.
- Fiscal effort to ease pressure on the RBNZ to deliver stimulus.
- Trade uncertainty could cap gains in NZD/JPY.
The bid tone around the New Zealand dollar strengthened, pushing the NZD/JPY cross higher by 15 pips to a session high of 71.31 after the New Zealand government raised fiscal spending in its half year budget update.
Finance Minister Grant Robertson announced the $12 billion increase in spending, most of which is the investment in infrastructure and pledged to maintain the debt in the range of 15 to 255 of the gross domestic product.
With government boosting fiscal spending, there will be less pressure on the Reserve Bank of New Zealand (RBNZ) to cut rates aggressively.
Hence, it’s no surprise that the NZD has picked up a bid on government’s decision to boost fiscal spending. The NZD/JPY pair is currently trading at 71.26, representing a 0.17% gain on the day.
The gains, however, could be short-lived if the risk sentiment takes a hit on trade uncertainty, boosting demand for the anti-risk Yen.
White House adviser Larry Kudow was out on the wires in the overnight trade stating that the Trump administration could move ahead with the planned tariff hike on Chinese goods, scheduled to take effect on Dec. 15.
So far, however, there are no signs of risk aversion in equities. The futures on the S&P 500 are currently flatlined. The index fell 0.11% on Tuesday.
Technical levels
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