NZ dollar fall as investors grab stocks, Australian dollar on upbeat sentiment
By Jason Krupp
Aug. 16 (BusinessDesk) - The New Zealand dollar fell against all major currencies last night as investors returned to
stock markets with gusto and largely ignored trading in the kiwi.
The currency recently traded at 83.21 U.S. cents, down from 83.62 cents yesterday, and fell to 71.31 on the
trade-weighted index of major trading partners' currencies from 72.09 previously.
Investor sentiment received a clear risk-on signal yesterday after official figures from Japan showed growth contracted
0.3% in the second quarter, beating expectations and suggesting the world’s third-biggest economy was recovering faster
than previously thought from the March earthquake and tsunami.
The Australian dollar climbed to US$1.0503 from US$1.0413 yesterday, its highest level since before the recent global
equity rout. The rush into the Australian currency put pressure on the New Zealand dollar, with the light volume of kiwi
dollar trading meaning it underperformed on the cross-rates.
"A lack of liquidity in the kiwi means you can get these strange moves sometimes," said Mike Burrowes, a market
strategist with Bank of New Zealand. "Investors moved strongly into Australian dollar, which has a lot more liquidity
that we do, and sometimes those positions can be quite large. That's not a problem for them but it is a problem for the
kiwi."
On the crosses, the New Zealand dollar recently traded at 79.20 Australian cents, down from 80.23 cents yesterday, and
fell to 63.91 Japanese yen from 64.24 yen previously. It dropped to 57.59 euro cents from 58.48 cents yesterday, and
declined to 50.77 pence from 51.32 pence.
The Reserve Bank of Australia is scheduled to release the minutes from its August meeting today, and the market will
look for hints on when the central bank is likely to cut interest rates. Already, 129 basis points of cuts are priced in
over the next 12-months according to the Overnight Index Swap curve.
"You can't imagine that there will be too much talk about them cutting rates given such a huge move in the cross
overnight," Burrowes said.
The kiwi may trade between a range of 82.80 U.S. cents and 83.90 cents, he said.
(BusinessDesk)