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NZ dollar drops two 2-week low as risk aversion returns, stocks, bonds fall

Wednesday 14th September 2016

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The New Zealand dollar dropped to a two-week low as equities, bonds and commodities fell and investors eschewed riskier assets in favour of the greenback.

The kiwi fell to 72.40 US cents, the lowest since Sept. 2, from 73.39 cents late yesterday. The trade-weighted index fell to 77.48 from 78.13.

Stocks fell in Europe and the US, with the Stoxx 600 Index down 1 percent and the Dow Jones Industrial Average down 1.4 percent, while the yield on benchmark 10-year Treasury bonds rose to about 1.74 percent, the highest since late June. The VIX Index rose to 18.8, the highest since the Brexit spike and the CRB Index of 19 commonly traded commodities declined 1.3 percent to a week-low.

"The commodity currencies have significantly underperformed, a reflection of increased risk aversion and the stronger USD has led to widespread falls in commodity prices," said Jason Wong, currency strategist at Bank of New Zealand. "There is widespread agreement that bonds and equities are over-valued and investors are finally doing something about it."

Traders will be watching for balance of payments figures today for the second quarter, which are expected to show the current account deficit fell to 2.6 percent of gross domestic product, from 3 percent. The market is also mulling the prospects for the Federal Reserve's monetary policy review next week after mixed views from Fed officials left December looking like the earliest for an interest rate hike.

The local currency fell to 97.04 Australian cents from 97.28 cents yesterday and fell to 4.8404 yuan from 4.9017 yuan. It dropped to 64.62 euro cents from 65.33 cents and slipped to 54.90 British pence from 55.02 pence. The kiwi declined to 74.36 yen from 75.03 yen yesterday.

BusinessDesk.co.nz



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