NZ dollar still on the sidelines as equity markets take centre stage

Friday 28th December 2018

The New Zealand dollar has largely been left on the sidelines as investors remain fixated on the gyrations in equity markets.

The kiwi traded 67.06 US cents as at 5pm in Wellington from 66.99 cents at 8.30am, down from 67.19 cents yesterday. The trade-weighted index fell to 73.25 from 73.57.

Currency markets have been quieter than normal through the Christmas and New Year period, with sharp moves on Wall Street attracting most of the attention. Financial markets have become increasingly volatile in recent months as investors wonder what impact a raft of geopolitical tensions will have on global growth. Many of those concerns centre around the US administration, including divisions in the White House after US President Donald Trump announced plans to leave Syria, trade tensions between the US and China, and the Federal government shutdown.

"The real focus of the last few days has been the gyrations in equity markets - it's incredibly volatile," said Peter Hunt, head of financial markets at Kiwibank. "Equity markets have been up, down, sideways - they're pretty volatile, but kiwi throughout the month of December has given back most of those gains from November."

The kiwi has dropped from 70.86 US cents at the start of the year, and Kiwibank sees further downside for the kiwi dollar heading into the New Year. Hunt said he doesn't anticipate much squaring up of positions on Monday by institutional investors resetting their portfolios for 2019, with much of those orders already completed.

The two-year swap rate fell 1 basis point to 1.97 percent, and 10-year swaps were down 1 basis points at 2.67 percent.

The kiwi dropped to 4.5977 Chinese yuan from 4.6296 yuan yesterday and traded at 95.12 Australian cents from 95.16 cents. It fell to 74.14 yen from 74.52 yen yesterday and dropped to 58.54 euro cents from 59.02 cents. The local currency traded at 52.94 British pence from 53.07 pence yesterday.

(BusinessDesk)

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