Sharechat Logo

NZ dollar falls versus yen, dollar as investors eschew risk

Friday 10th October 2008

Text too small?
The New Zealand dollar fell against the yen and the U.S. dollar as slumping stock markets spurred investors to eschew riskier, or higher-yielding, investments.

The Dow Jones Industrial Average sank below 9000 points after a ban was lifted on short selling on 969 financial related stocks and amid concern the credit crisis will engulf more companies. General Motors slumped 31%. Three Asian central banks cut their benchmark rates yesterday, and the Reserve Bank of New Zealand extended the range of securities it will accept as collateral for loans.

"Risky assets will continue to be shunned by investors," said Khoon Goh, senior markets economist at ANZ National Bank. "The yen will continue to strengthen" against currencies with higher yields.

The New Zealand dollar fell to 60.50 U.S. cents from 62.47 cents yesterday after the Dow Jones plummeted 7.3%. It declined to 60.52 yen from 63.30.

The International Monetary Fund and World Bank have called on the Group of Seven leading industrial nations, who are meeting this weekend, to take an active role in addressing the situation. IMF director Dominique Strauss-Kahn told reporters in Washington that the world is "on the cusp of a global recession."

The markets are focussing on what may be discussed at the meeting, and "will want to see some indication of future plans," said Danica Hampton, currency strategist at the Bank of New Zealand. "Handled correctly, soothing words from the G7 could see further stability return to financial markets next week."

Governor of New Zealand's central bank Alan Bollard rejected calls to cut the official cash rate early, and is satisfied the with levels of confidence in New Zealand's banking sector, according to a statement yesterday. The bank is to review monetary policy on Oct. 23, where it is expected to cut the OCR by as much as 100 basis points, according to some economists.

"The Reserve Bank's point of view is that is doesn't feel the need to inject confidence in the banking sector," Goh said of the bank's decision not to cut rates sooner.

Goh predicts the kiwi currency will trade between 59 and 62.5 U.S. cents today, and will "underperform against the yen."


Paul MacBeth,

  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:

EROAD Limited (NZX: ERD) launches Clarity Solo Dashcam
22nd October 2021 Morning Report
Pictor ready to roll out game-changing COVID antibody test in New Zealand
Scott Technology Limited (NZX: SCT) Announces FY21 Results
21st October 2021 Morning Report
Greenfern Industries Limited (NZX: GFI) L&Q Notice
TruScreen Group Limited (NZX: TRU) Clinical Trial Results Highlight Efficacy of TRU Technology
20th October 2021 Morning Report
Freightways Limited (NZX: FRE) Acquisition of ProducePronto
19th October 2021 Morning Report