The New Zealand dollar touched a five month high against the US dollar on Monday as escalating US-China trade tensions eased following the G20 leaders' summit in Argentina over the weekend.
Analysts are expecting a positive week from stock markets around the world as the US and China take a breather from tit-for-tat tariff escalation, which has shaken global business outlooks for several months now.
The kiwi jumped from US68.78 cents on Friday to US69.16 ¢ early Monday morning and late that afternoon was the same.
The Australian dollar also climbed to near four-month highs after the US and China agreed to halt their trade spat with a 90-day tariff truce.
Craigs Investment Partners broker Peter McIntyre said it was likely markets would remain in a positive mood this week, following the US-China trade truce.
“While the differences between the two countries are far from resolved, we can probably expect a short-term relief rally,” he said.
Two of the biggest worries for investors have been rising trade tensions, and an increasingly aggressive approach from the US' central bank the Federal Reserve for continued interest rate rises in 2019.
“For the time being, it appears these two concerns have been somewhat defused,” he said.
China's leader Xi Jinping and US president Donald Trump met for dinner at the G20 meeting in Buenos Aires where a truce was reportedly called. Both Trump and Xi sent out positive signals and Trump reportedly agreed not to go ahead with plans to increase tariffs on $US200 billion ($NZ289 B) of Chinese imports, from the current 10% imposed to 25% in January, BusinessDesk reported.
The US won't push through increased tariffs from January, China agreed to buy a substantial amount of American products, and both parties will discuss structural changes to intellectual property protection, non-tariff barriers, cyber intrusions, services and agriculture.
The stoush has threatened to slow global growth and weighed more heavily on open trading economies such as New Zealand.
“The US-China trade war has been a key driver of markets for much of this year and a de-escalation of tension sets the scene for a broadly-based rally in risk assets,” said Bank of New Zealand senior markets strategist Jason Wong.
“We will have to revise our New Zealand dollar forecasts higher.”
Earlier forecasts had been “based on further tariffs proceeding, with the associated hit to global growth and spillover effects,” he added.
*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.