NZ dollar slides as policy-makers hint at regulation, Wall St slides

Monday 23rd November 2009

The New Zealand dollar slid lower as central bank policy-makers’ hinted at intervention and unwinding of stimulus measures, eroding investors’ appetite for higher-yielding, or riskier, assets and pushing down equity markets.

European Central Bank President Jean-Claude Trichet said the central bank plans to unwind some of its stimulus measures provided it doesn’t boost inflation. While emergency measures are “sometimes necessary,” prolonged use can “lead to dependence and even addiction,” he said. Last week, Brazil introduced new taxes on foreign investment to try and prevent the real from appreciating, while South Korea’s financial regulator has set a limit on banks’ foreign currency funding and Taiwan’s central bank said it would intervene if irregular factors caused too much volatility in the Taiwan dollar. Stocks in Europe and on Wall Street fell as sentiment for risk declined.

“There’s increasing talk of increased regulatory intervention in the markets, and all these things weigh on risk sentiment,” said Khoon Goh, senior markets economist at ANZ National Bank. “The kiwi is still following the performance of equity markets, and how it fares is still coming from offshore.”

The kiwi sank to 72.43 U.S. cents from 72.90 cents on Friday in New York, and declined to 64.81 on the trade-weighted index, or TWI, a measure of the currency against a basket of five partners, from 65.12. It decreased to 64.34 yen from 64.79 yen last week, and dropped to 79.16 Australian cents from 79.40 cents. It slipped to 48.72 euro cents from 48.91 cents on Friday, and was little changed at 43.89 pence from 43.91 pence.

Goh said the currency may trade between 71.85 U.S. cents and 72.72 cents today as it continues to track offshore equity markets, though it might get pushed around by migration and consumer confidence data today.

Net migration may have continued to climb last month, underpinning the resurgent property market that has led the country out of its first recession in a decade. The net annual inflow of migrants hit 17,000 in October, a five-year high, and economists predict this will peak at about 22,000 early next year.

The ANZ Roy Morgan Consumer Confidence survey out today will show whether people are preparing to open their wallets this Christmas after lacklustre spending on credit and electronic cards last month has raised concerns it might be a tough holiday period for retailers.

Businesswire.co.nz

Comments from our readers

No comments yet