NZ dollar little changed as prospect of lower Deutsche Bank settlement quells market fears

Monday 3rd October 2016

The New Zealand dollar was little changed as the prospect of a smaller settlement by Deutsche Bank with US authorities eased market fears a big penalty could have wider ramifications for the financial sector.

The kiwi traded at 72.65 US cents at 8am in Wellington from 72.81 cents at the New York close on Friday and 72.64 cents at 5pm in Wellington. The trade-weighted index was at 77.13 from 77.17.

The Chicago Board Options Exchange's Volatility Index, known as Wall Street's 'fear gauge', fell 5.2 percent as investors were soothed by an Agence France Presse report that Deutsche Bank would settle an investigation with the US Department of Justice into the sale of mortgage-backed securities with a US$5.4 billion payment, less than the US$14 billion claim first reported. That bolstered appetite for risk-sensitive assets at the end of the week, pushing up stock markets.

"News that DB (Deutsche Bank) might settle with the US Department of Justice for US$5.4bn saw equities rally (DB up 6 percent) and treasuries sell off," ANZ Bank New Zealand chief economist Cameron Bagrie said in a note. "Dips (in the kiwi are) still actively supported and we don’t see that changing until the world economy moves out of 'muddle through' (clear risk-off develops) or the tenor of local data folds."

The local currency rose to 56.29 British pence from 56.10 pence on Friday in New York after UK Prime Minister Theresa May outlined plans to trigger an exit from the European Union by the end of March next year. It was little changed at 64.69 euro cents from 64.75 cents last week.

The kiwi traded at 94.82 Australian cents from 94.88 cents last week ahead of the Reserve Bank of Australia's first policy review under new governor Philip Lowe on Tuesday, with traders expecting no change.

The New Zealand dollar was little changed at 73.64 yen from 73.78 yen last week and slipped to 4.8447 Chinese yuan from 4.8553 yuan.

BusinessDesk.co.nz

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