NZ dollar falls vs. yen as investors seek haven in face of oil's decline

Tuesday 16th December 2014

The New Zealand dollar fell against the yen, which gained against most major currencies as crude oil sank to a five year low, as investors sought a haven from poor global risk sentiment.

The kiwi fell to 90.94 yen from 91.92 yen in late local trading yesterday. The New Zealand dollar declined to 77.32 US cents from 77.43 cents.

West Texas Intermediate for January delivery fell as low as US$55.87 a barrel on the New York Mercantile Exchange, the lowest since May 2009, after the United Arab Emirates said oil exporters would not cut output even if prices fell as low as US$40 a barrel. Oil's decline has stoked concern global demand is faltering, which has eroded investor appetite for risk. Traders are keeping one eye on the New Zealand government's Half Year Economic and Fiscal Update today, which may show a delayed return to surplus.

"Risk sentiment remains fragile, with equities and emerging market currencies feeling the most pain," said Raiko Shareef, currency strategist at Bank of New Zealand in Wellington. "Oil prices remain at the centre of market attention, as opposed to any fresh news or data. The USD is slightly stronger in this environment, with JPY (the yen) the only clear winner, benefiting from a safe haven bid."

Shareef said there was a chance the HYEFU will show the "much-vaunted return to surplus this fiscal year might not materialise, thanks to markedly lower revenue as dairy prices dive."

He doesn't expect much reaction in the kiwi dollar, however, which he sees trading in a range of 76.70 US cents to 77.90 cents.

Traders will get a fresh update on dairy prices with the latest GlobalDairyTrade auction tonight after prices fell to the lowest since August 2009 in the last sale two weeks ago, which was followed by Fonterra Cooperative Group slashing its milk payout forecast.

The trade weighted index declined to 77.87 from 78.04 late yesterday. The local currency traded at 94.05 Australian cents from 94.13 cents and fell to 62.19 euro cents from 62.62 cents. It rose to 49.47 British pence from 49.30 pence.

BusinessDesk.co.nz

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