Sharechat Logo

NZ dollar rises as USD recovers on yen intervention

Friday 18th March 2011

Text too small?

The New Zealand dollar spiked higher in early afternoon trading as the US dollar surged against the yen on news that the Group of Seven (G7) has agreed on joint intervention to stem a rise in the yen after the Japanese earthquake.

The dollar jumped to 81.20 yen from 79.20 yen, Reuters reported. It has recovered from a post-World War 2 record low of 76.25 yen on Thursday.

The yen had risen strongly since last week's catastrophic earthquake and tsunami, as Japanese investors and insurers were expected to repatriate funds. Investors also closed long positions in higher-yielding, riskier assets such as the Australian and NZ dollars, putting them under pressure.

"This is quite unusual for the G7 to come out with a statement indicating a joint intervention," said Daniel Bell, senior dealer at HiFX.

"The US dollar is strengthening against the yen and the carry trade currencies like the NZ dollar and Australian dollar are being dragged up," he said.

The G7 nations agreed on Friday to jointly intervene in the currency market to stem a sharp yen.

"Given yen moves after the tragic events that hit Japan, the United States, Britain, Canada and the European Central Bank have agreed with Japan to jointly intervene in the currency market," Finance Minister Yoshihiko Noda told reporters.

Japanese authorities will buy dollar yen in the market and other central banks will act when their markets open, Noda said. He declined to comment on the size of Tokyo's intervention.

"When Japan is in such a state, it's extremely meaningful for G7 countries to co-operate and take co-ordinated action to stabilise financial markets," he said.

The NZ dollar rose to 58.71 yen by early afternoon from 56.78 yen at 8am and 57.08 yen at 5pm yesterday.

Yesterday morning the NZ dollar plunged from US72.80c to a 6-1/2-month low around US71.20c, as the greenback hit a record low of 76.25 yen when a break of the previous record low of 79.75 triggered a cascade of automatic "sell" orders.

The US dollar later bounced back to hover around 79 yen, and the surge in the yen was expected to be discussed today on a conference call among G7 finance ministers.

ANZ said yesterday's trading had been epitomised by illiquidity and irrationality delivering substantial moves. The yen movements had driven the kiwi extremely close to critical support at US71.08c.

That level held but corrective attempts overnight were muted at best, ANZ said.

The trade weighted index rose to 63.97 by early afternoon from 63.34 at 8am from 63.88.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
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:

Livestock Improvement Corporation Limited (NZX: LIC) Special Dividend
8th December 2021 Morning Report
New Zealand King Salmon Investments Limited (NZX: NZK) Market Update
Scales Corporation Limited (NZX: SCL) Market update
Delegat Group Limited (NZX: DGL) $333 million syndicated bank facilities
7th December 2021 Morning Report
Sky Network Television Limited (NZX: SKY) Transformation accelerates - Sky raises FY22 guidance
PGG Wrightson Limited (NZX: PGW) FY22 Operating EBITDA forecast to better last year
Vulcan Steel Limited (NZX: VSL) Trading Update & Earnings Upgrade
6th December 2021 Morning Report