Tuesday 22nd June 2010 |
Text too small? |
The New Zealand dollar dropped below 71 US cents after the Chinese government kept the mid-point of the yuan unchanged having earlier flagged it will let its currency appreciate, while local data looms over the next two days.
China kept the yuan’s fix unchanged from Friday after saying it will resume an appreciation regime and let the currency trade in a band of plus or minus 5%, disappointing investors who were looking for a more rapid gain in the Chinese currency.
The yuan strengthened to 6.7968 per US dollar from 6.8297 yesterday, and recently traded at 4.8135 per kiwi dollar. That comes ahead of New Zealand’s first quarter balance of payments and gross domestic product data out over the next two days, which is expected to show a smaller current account deficit and a slower pace of economic recovery.
“The market was surprised China didn’t change the mid-point rate of the yuan,” and pared back earlier expectations that supported so-called risk currencies such as the kiwi, said Khoon Goh, senior markets economist at ANZ New Zealand. “The market’s uncomfortable with the kiwi around 71.50 U.S. cents and decided to push it back with the two pieces of key data coming up.”
The kiwi dropped to 70.86 US cents from 71.30 cents yesterday, and declined to 68.15 on the trade-weighted index of major trading partners’ currencies from 68.34. It fell to 64.51 yen from 65.09 yen yesterday, and edged up to 80.72 Australian cents from 80.68 cents. It was little changed at 57.52 euro cents from 57.51 cents yesterday, and increased to 48.03 pence from 47.92 pence.
Goh said the currency may trade between 70.60 US cents from 71.30 cents today, and will probably stay in that range until the GDP is released on Thursday.
New Zealand’s economy probably grew 0.5% in the three months through March, according to a Reuters survey, below the central bank’s 0.8% forecast, and Goh said there’s a risk that it could come in softer, which would put the currency under pressure.
Britain’s Chancellor of the Exchequer George Osborne will unveil his emergency budget today, and traders will be watching to see how deep his cuts to spending are. Though the market is expecting major austerity measures to rein in the fiscal deficit, Goh said the main issue will be the response from the credit rating agencies.
“The plan for improving the fiscal deficit is crucial – rating agencies have been willing to cut ratings of sovereigns in Europe,” he said.
Businesswire.co.nz
No comments yet
Second St John withdrawal of labour takes effect tomorrow with further strikes likely
Sanford Appoints Independent Director
CRP ADVISES CLOSURE OF SHARE OFFER TO EXISTING INVESTOR
Devon Funds Morning Note - 14 August 2024
OCR 5.25% - Monetary restraint tempered as inflation converges on target
Consumers still need due diligence as new deposit takers emerge.
Woolworths strike: staff asked to dress up in Disney costumes for a week on their own dollar
Turners Invests in Quashed Online Insurance Platform
PGW Reports on Challenging Year
Arvida Announces Executive Team Changes