NZ dollar edges lower, may decline further as investors shun risk

Monday 16th November 2015

The New Zealand dollar edged lower and may decline further as investors eschew riskier assets following the terrorist attacks in Paris at the weekend.

The kiwi slipped to 65.21 US cents at 8am in Wellington, from 65.44 cents at the New York close and 65.42 cents at 5pm on Friday. The trade-weighted index was at 71.22 from 71.26 on Friday.

Attacks by Islamist militants across Paris on Friday night, which killed 129 people and injured 352, may prompt a short-term reaction from investors to reduce their positions in higher risk assets such as equities and currencies such as the kiwi, and favour more stable investments such as bonds and the Japanese yen, analysts said. News of the terrorist attacks broke after Friday's close of US futures and stock markets, but about half an hour before the close of currency and bond markets.

"There was little discernible reaction in currencies in that window," Bank of New Zealand currency strategist Raiko Shareef said in a note. "We’d expect some defensiveness in investor risk appetite early this week. Consistent with that, the Japanese yen is 0.2 percent stronger at the open this morning, relative to Friday’s close, while the Australian and the New Zealand dollars are 0.2 percent weaker."

In New Zealand today, the BNZ-BusinessNZ performance of services index is due out at 10:30am and third quarter retail sales data is scheduled for release at 10:45am.

The New Zealand dollar touched a month low of 79.72 yen, and was trading at 79.77 yen at 8am from 80.19 yen on Friday. It edged up to 60.71 euro cents from 60.61 cents on Friday.

The kiwi fell to 42.80 British pence from 43.01 British pence on Friday, and was little changed at 91.64 Australian cents from 91.68 cents.

The local currency declined to 4.1562 yuan from 4.1688 yuan on Friday. The Chinese currency may soon join other top global currencies in the International Monetary Fund's benchmark foreign exchange basket after Fund staff and IMF chief Christine Lagarde gave their support to the move. The recommendation paves the way for the Fund's executive board, which has the final say, to place the yuan on a par with the US dollar, Japanese yen, British pound and euro at a meeting scheduled for Nov. 30, and would likely increase demand for the yuan, Reuters reported.

(BusinessDesk)

BusinessDesk.co.nz

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