NZ dollar falls as heightened uncertainty dents appetite for riskier assets

Thursday 25th October 2018

The New Zealand dollar fell against a broadly stronger greenback as heightened volatility in financial markets weighed on risk-sensitive assets such as the kiwi.

The local currency declined to 65.22 US cents as at 8am in Wellington from 65.61 cents yesterday. The trade-weighted index decreased to 71.67 from 71.91.

Stocks on Wall Street were weaker with the Dow Jones Industrial Average down 1.3 percent in late trading as heightened uncertainty over global growth encouraged investors to seek more defensive assets such as bonds. The US dollar index gained 0.5 percent and the VIX - Wall Street's fear gauge - climbed 14 percent to 23.68, well above the 20-year moving average of 13.35. Weak European manufacturing surveys added to the negative sentiment.

"There’s a clear asset allocation rotation going on behind the scenes, out of equities and into fixed income, and out of cyclicals into defensives, due to fears about the global growth outlook," Bank of New Zealand senior markets strategist Jason Wong said in a note. "Against a backdrop of broad USD strength, the NZD is probing fresh lows for the week."

Local data today include September merchandise trade figures, which are expected to show a monthly trade deficit of $1.37 billion.

The kiwi fell to 84.93 Canadian cents from 85.78 cents yesterday. The Bank of Canada hiked its key interest rate a quarter-point to 1.75 percent and indicated it will need to achieve a more neutral stance to meet its inflation target.

The local currency gained to 5.9500 Swedish krona from 5.9157 krona yesterday after the Riksbank indicated a rate hike was likely in December or February.

The kiwi traded at 92.29 Australian cents from 92.40 cents yesterday as investors await Australian inflation data next week. It fell to 4.5269 Chinese yuan from 4.5517 yuan and declined to 73.27 yen from 73.85 yen.

The local currency traded at 57.26 euro cents from 57.23 cents yesterday as investors await the European Central Bank's policy meeting, and was little changed at 50.61 British pence from 50.53 pence.

(BusinessDesk)

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