NZ dollar sinks to 13-month low vs yen

NZ dollar sinks to 13-month low vs yen as investors look for safety

By Paul McBeth

Aug. 25 (BusinessDesk) – The New Zealand dollar sank to a 13-month low against the yen as investors spurned Euro and the greenback amid fears of a double-dip recession.

The yen surged to a 15-year high 84.07 per U.S. dollar after weak American housing data stoked concerns about the state of the global recovery, and prompted a flight to safety from investors. The surge in the yen comes as the Japanese government has been trying to jawbone the currency, with Finance Minister Yoshihiko Noda telling reporters “excessive and disorderly movements in the currency market can have a negative impact on the stability of the economy.” The kiwi fell as low as 58.63 yen, the lowest since July last year.

“It’s all about talk of a double-dip recession in Europe, the U.K. and the U.S. as well,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia. Against the U.S. dollar, “the kiwi and the Aussie have held up on the offshore demand” for the higher yields on offer, he said referring to the trans-Tasman currencies colloquially.

The kiwi fell to 59.10 yen from 59.25 yen yesterday, and was little changed at 70.39 U.S. cents from 70.26 cents. It was unchanged at 66.10 on the trade-weighted index of major trading partners’ currencies, and gained to 79.65 Australian cents from 79.51 cents yesterday. It slipped to 55.53 euro cents from 55.72 cents yesterday, and traded at 45.63 pence from 45.64 pence.

Kelleher said the currency may trade between 70 U.S. cents and 70.50 cents today as it continues to track offshore markets, amid a quiet data week, and he expects it will eventually fall below 70 cents as American investors repatriate their funds into the greenback.

He expects the currency will target 58.50 yen on the cross-rate, and wouldn’t be surprised if the Japanese government clears its throat about the strength of the currency today.

“Watch out for some verbalisation later on in the day” from Japanese officials, he said.

Investors were downbeat as stocks in Europe and on Wall Street dropped amid a 27% plunge in U.S. existing house sales last month. Chicago Federal Reserve President Charles Evans said the risk of a double-dip recession increased, was not the most likely outcome.

Martin Weale, the Bank of England’s newest monetary policy committee member, said the bank’s forecasts were too optimistic and the U.K. could slide back into recession.

(BusinessDesk)

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