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New Zealand dollar treads water after wild swings

Friday 4th January 2019

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The New Zealand dollar is little changed as investors weigh recent extreme volatility and look for some direction from United States equities markets and US employment data due out overnight.

The kiwi was trading at 67.02 US cents at 5pm in Wellington from 66.98 at 8.30 this morning after earlier this week trading a very wide 65.88 US cent to 67.50 range. The trade weighted index eased to 73.16 points from 73.18.

“It’s been a funny old day – the market’s left scratching its head a little bit after the extreme volatility we saw yesterday,” says Mitchell McIntyre at HiFX.

The market found a little support and has been drifting higher after another plunge on Wall Street prompted sales of long US dollar positions to cover losses on equities.

The broad measure of the US share market, the S&P 500 Index, shed 2.5 percent on Thursday, with the Dow Jones Index down 2.8 percent and the tech-heavy Nasdaq falling more than 3 percent.

“It’s hard to see what’s going to happen from here. Commonsense would say we’re going to get another test of the downside – Apple’s off 10 percent,” McIntyre says.

A warning from Apple Inc. that its December quarter sales were below expectations due to a slowdown in the Chinese market was one of a number of adverse pieces of news that have been throwing markets about in thin holiday-affected trading. The Japanese market was closed for a bank holiday on Thursday.

If Apple’s experience is indicative of the broader market, then the share prices of a number of companies with extensive businesses in China are likely to come under pressure too, McIntyre said.

The US non-farm payroll data for December, due out on Friday in the US, is expected to show 179,000 jobs were added in the month, up from 155,000 in November, a number that fell well short of expectations of 198,000.

The October jobs count was also revised lower from an initially reported 250,000 to 237,000, adding to growing indicators that the US economy is slowing amid President Donald Trump’s trade war with China.

Sabre-rattling from China over Taiwan and the fact that there’s no end in sight to Trump’s partial government shut-down aren’t helping sentiment either.

The US equities markets have just come through their weakest December in 10 years and now the S&P 500 and the Dow have had their worst start to January since 2000.

“Today, everyone’s been sitting on their hands and waiting for the next piece of news to give us guidance,” said McIntyre.

The New Zealand dollar fell to 95.35 Australian cents from 95.55 this morning, was steady against the pound at 53.02 British pence from 53.01, was at 58.83 euro cents from 58.73, 72.64 yen from 72.24, and 4.6004 Chinese yuan from 4.6000.

The New Zealand two-year swap rate ended the session at 1.9450 percent from 1.9324 percent yesterday while the 10-year rate rose to 2.5800 percent from 2.554.


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