Sharechat Logo

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

Wednesday 25th August 2010

Text too small?

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 US 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 UK and the US as well,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

Against the US 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 US 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 US 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 US 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 UK could slide back into recession.

Businesswire.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar gains on G20 preference for growth
NZ dollar dips as Wellington CBD checked for quake damage
NZ dollar gains, bolstered by RBA minutes, strong dairy prices
NZ dollar falls after central bank says it may scale up currency intervention
NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street
NZ dollar trades little changed as US budget talks bear down on deadline
NZ dollar falls with equities on view US to sail over fiscal cliff
NZ dollar weakens as fiscal cliff looms, long bets unwind
NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
NZ dollar slips as fiscal cliff talks grind slower in Washington