NZ dollar weakens as emerging markets assets lose favour, RBNZ restrictions limit appeal
By Tina Morrison
Aug 21 (BusinessDesk) – The New Zealand dollar fell to a week low as investors move out of emerging markets and new
Reserve Bank restrictions on home lending limit the appeal of the local currency.
The kiwi fell as low as 79.50 US cents overnight and was at 79.87 cents at 8am in Wellington, unchanged from the 5pm
market close yesterday. The trade-weighted index dropped to 74.97 from 75.21 yesterday.
The New Zealand dollar has shed 1.4 percent this week as investors dump emerging market assets in anticipation of the
Federal Reserve ending its money printing programme and after New Zealand’s central bank said yesterday it would
restrict low equity lending by trading banks from October to curb a house price bubble and limit the need for interest
“The kiwi has spent the overnight session licking its wounds following the big fall yesterday in the wake of the RBNZ
announcement - it very much stands out as the underperformer amongst the major currencies,” said Mike Jones, a currency
strategist at Bank of New Zealand. “I suspect it will remain pretty heavy today with investors keeping a wary eye on the
selloff in emerging market assets.”
The New Zealand dollar may test 79.50 US cents today, he said.
BNZ’s Jones said it was notable the kiwi didn’t pick up even after a good dairy price auction overnight.Prices of dairy
products gained in the latest GlobalDairyTrade auction, with the GDT Price Index rising 2.3 percent compared to the last
sale two weeks ago, the fourth gain in five auctions.
Local data for release in New Zealand today, including migration, tourism and credit card spending are unlikely to
influence the currency, Jones said.
“The bigger driver today will be whether the rout we have seen this week in emerging market assets continues and how
Asian stocks trade with that general risk sentiment being the big driver of the kiwi on the day,” Jones said. “A lot of
cash that the Fed has been injecting into the US is being recycled through high risk emerging market assets and now that
the Fed has signalled the end of that cheap and easy money, the cash is starting to be withdrawn from emerging markets,
Asian emerging markets in particular.”
Investors will likely be cautious ahead of the release of the minutes of the Federal Reserve Open Committee’s last
meeting, expected at 6am New Zealand time tomorrow, Jones said.
“It’s going to be another lacklustre day for the kiwi.”
The New Zealand dollar fell to 87.89 Australian cents at 8am in Wellington from 88.08 cents yesterday and slipped to
77.65 yen from 77.91 yen. The local currency declined to 59.51 euro cents from 59.83 cents yesterday and weakened to
50.95 British pence fr4om 51.04 pence.