Thursday 3rd January 2019 |
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The New Zealand dollar weakened into the New Year amid negative global news such as China threatening Taiwan again and the European Central Bank appointing temporary administrators to run an Italian bank, Banca Carige.
The kiwi was trading at its lows at 66.56 US cents at 8.20am in Wellington compared with its high in New York overnight at 67.50. The trade weighted index was at 72.87 points from 72.95.
“It’s weakened quite substantially in the last 24 hours,” says Tim Kelleher, the head of external foreign exchange sales at ASB Bank.
“You wouldn’t say it’s one particular thing but we’ve just had China threatening Taiwan again this morning – that sort of thing is always interesting,” coupled with the ECB’s move on Banca Carige and continuing turmoil in Britain over Brexit has meant “there’s really been no place to hide,” Kelleher says.
The New Zealand currency followed other currencies, including the Australian dollar, euro and British pound lower and investors sought the safety of the US dollar, with its strength also underpinned by the US Federal Reserve’s policy of continuing rate hikes.
Earlier today, Chinese president-for-life Xi Jinping urged the people of Taiwan to accept that it “must and will be” reunited with China and that China reserved the right to use force.
Taiwan is self-governed but has never formally declared independence from mainland China.
The ECB’s decision to appoint three temporary administrators to Banca Carige came after the majority of its board members resigned.
The administrators, who will replace the board, are charged with steering the bank to stabilise its governance and to pursue effective solutions to ensure stability and compliance with ECB rules.
In Britain, the market is nervous ahead of the scheduled mid-month parliamentary vote on Prime Minister Theresa May’s Brexit deal.
May used her New Year’s message to urge Parliament to back her Brexit deal and Downing Street officials confirmed that May has been seeking further concessions from fellow European leaders over the Christmas period.
The alternative would be a “hard Brexit” in March, assuming Britain does actually leave the European Union, amid growing calls for it to 'Bremain'.
The kiwi traded this morning at 95.13 Australian cents from 95.19 cents in New York, at 4.5665 Chinese yuan from 4.6169, at 58.70 euro cents from 58.56, and at 52.81 British pence from 52.65.
(BusinessDesk)
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