Friday 8th January 2016 |
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The New Zealand dollar regained ground after China fixed the yuan reference rate marginally higher after eight straight days of cuts, easing concerns that the People’s Bank of China sees a weaker economy than many in the markets.
The kiwi traded at 66.44 US cents as at 5pm in Wellington, from 66.22 cents at the start of the day and from 66.37 cents late yesterday. The local currency rose to 4.3789 yuan from 4.3744 yuan yesterday.
The PBOC set the daily fixing for the yuan at 6.5636 per US dollar, 0.02 percent up from yesterday, having slashed the reference rate by 1.4 percent over the past eight days. The Chinese central bank's move to lower the band for its currency has stoked concern the world's second-largest economy may be weaker than expected, which has driven down stock markets and growth-linked currencies such as the kiwi, which is heading for a 2.8 percent weekly decline against the greenback.
"The kiwi has had a massive selloff this week, much of it driven by China and the weakening of the Chinese yuan," said Angus Nicolson, market analyst at IG Markets in Melbourne. "The fact that we're seeing the Bank of China weaken its currency at a record rate makes people think that economy is far worse than feared."
While the kiwi spiked higher when the yuan fixing was announced, it subsequently pared its gains "partly because global investors are pretty unsure whether China is intent on further weakening the yuan," Nicolson said. The kiwi could fall back to its lows of last September 2015 of around 64 US cents, he said.
The kiwi rose to 78.57 yen from 78.45 yen yesterday, having earlier fallen as low as 77.44 yen, the lowest since Oct. 5 last year. It was little changed at 94.19 Australian cents from 94.16 cents yesterday and was lower at 61.07 euro cents from 61.35 cents. It traded at 45.44 British pence from 45.37 pence. The trade-weighted index was little changed at 73.06 from 73.01 late yesterday.
BusinessDesk.co.nz
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