NZ dollar heads for third monthly decline as U.S. dollar finds base
By Paul McBeth
Dec. 29 (BusinessWire) – The New Zealand dollar headed for its third straight monthly decline, having peaked above 76
U.S. cents in October, as the U.S. dollar climbs from its lows against the yen and euro and investors square up ahead of
the New Year break.
The kiwi has slipped 1% this month and is unlikely to recoup those losses in the next two days after the rampant
optimism through the middle of the year gave way to a bout of risk aversion. Traders pared back their exposure to higher
yielding currencies in the lead-up to Christmas-New Year break. The Dollar Index, a measure of the greenback against a
basket of six currencies, halted its year-long slide in December, and has surged 3.8% to 77.61 this month. The greenback
reached a 14-year low against the yen and a 15-month low against the euro at the end of November.
“There’s not a lot of action with people focused firmly on the Christmas holiday period,” said Danica Hampton, currency
strategist at Bank of New Zealand. “The market’s coming up to year-end and there’s a possibility that people may be
squaring up their positions, but I suspect most of that’s been done based on the big moves in the U.S. dollar.”
The kiwi was unchanged at 70.80 U.S. cents and edged up to 64.77 on the trade-weighted index, or TWI, a measure of the
currency against a basket of five trading partners, from 64.74 yesterday. It increased to 64.82 yen from 64.79 yen
yesterday and rose to 79.82 Australian cents from 79.76 cents. It slipped to 44.24 pence from 44.33 pence yesterday and
was little changed at 49.19 euro cents from 49.20 cents.
Hampton said the currency may trade between 70.70 U.S. cents and 71.20 cents today and will probably follow Asian equity
markets with little in the way of news expected this week.
“The market can be quite interesting with liquidity quite thin – if we have some news we could see some relatively large
moves,” she said.
On Christmas Day, Japanese Prime Minister Yukio Hatoyama approved a record budget worth 92.3 trillion yen to help revive
the flagging economy, and predicted the world’s second largest economy will grow 1.4% next year. Japan’s industrial
production rose 2.6% in November and retail sales increased 0.2%. The Japanese currency was little changed at 91.56 yen
per U.S. dollar from 91.49 yesterday.
(BusinessWire)