NZ dollar drops 1.3% vs greenback as global sharemarkets sink
By Jason Krupp
Aug. 19 (BusinessDesk) - The New Zealand dollar dropped 1.3% against the greenback after a raft of weak U.S. economic
data saw global equities plummet with investors fleeing for the safety of bonds and gold.
The New Zealand dollar recently traded at 82 U.S cents, down from 83.06 cents yesterday, and fell to 70.60 on the
trade-weighted index of major trading partners' currencies from 71.24.
Global equity markets shifted into full retreat amid fears the U.S. economy was spiraling into recession after the
August survey of U.S. Mid-Atlantic factory activity slumped to a two and a half year low, and the Philadelphia Federal
Reserve Bank Index dropped to its lowest level since March 2009.
On Wall Street, the Standard & Poor's 500 Index fell 4.8% to 1,136.48, and Europe's Stoxx 600 Index fell 4.7% to 226.70. That saw demand for
growth-linked assets, such as the kiwi and Australian dollars, dwindle as investors fled for the relative safety of
bonds and gold. The price of gold spiked to US$1825.90 an ounce, up from US$1795.39 yesterday, and the on yield 10-year
U.S. Treasuries dropped 8.7 basis points to 2.083%, near their lowest level since the global financial crisis.
"People were expecting a small decline in the data but the extent of it totally caught the market off guard," said Khoon
Goh, head of market economics and strategy at ANZ New Zealand. "That saw risk come off with massive selling of risk
assets across the board, which filtered down into our currency."
On the crosses, the New Zealand dollar recently traded at 79.01 Australian cents, down from 79.34 cents yesterday, and
fell to 62.84 Japanese yen from 63.60 yen previously. It dropped to 57.28 euro cents from 57.65 cents yesterday, and
declined to 49.72pence from 50.28 pence previously.
Goh said the kiwi may trade between a range of 81.80 U.S. cents and 82.20 cents, with the currency possibly heading for
80 cents level if it breaks below the lower end of the range.
(BusinessDesk)