NZ dollar starts 2016 weaker amid concerns about China, Middle East

Tuesday 5th January 2016

The New Zealand dollar has started the new year weaker as concerns about the Chinese economy and heightened tensions in the Middle East prompted investors to sell higher risk assets.

The kiwi dropped to 67.42 US cents at 8am in Wellington, from 68.40 cents at 8am on Jan. 1. The trade-weighted index fell to 73.73 from 74.28 at the start of the year.

Factory activity data from China missed expectations, sparking a selloff in the nation's stock market and a subsequent trading halt, while the central bank allowed the yuan to weaken again. Concerns about slowing growth in the world's second-largest economy and the prospect of further weakness in its equity market weighed on global equities and currencies whose economies export to China, such as the kiwi and Aussie, while US Treasuries, gold and safe haven currencies such as the yen strengthened.

Mounting tensions between Saudi Arabia and Iran after Saudi Arabia executed cleric Nimr al-Nimr, a critic of the kingdom’s treatment of its Shiite minority, also prompted investors to eschew riskier assets.

"We have had a bit of a perfect storm for the first day back for the Asian market," said Martin Rudings, OMF senior dealer, foreign exchange. "It's risk off as tensions have grown considerably. The kiwi has suffered along with most other currencies, other than the US.

"It's going to be a lot harder for the market to push it a lot lower from here."

The New Zealand dollar touched a month low of 80.08 yen overnight and was trading at 80.45 yen at 8am from 82.07 yen on Jan. 1.

The local currency advanced to 93.78 Australian cents from 93.63 cents. It slipped to 62.28 euro cents from 62.95 cents, fell to 45.85 British pence from 46.28 pence, and declined to 4.4051 yuan from 4.4380 yuan.

BusinessDesk.co.nz

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