NZ dollar eases after weak US housing data takes edge from risk appetite

Thursday 19th November 2009

The New Zealand dollar eased lower after weaker-than-expected U.S. housing data eroded investors’ appetite for higher-yielding, or riskier, assets and dragged down stocks on Wall Street.

Housing starts in the U.S. fell to an annualised rate of 529,000 last month, the lowest in six months, damping optimism about the economic recovery in the U.S. Stocks on Wall Street and commodity prices declined, with the Dow Jones Industrial Average falling 0.1%. Earlier in the session, growth sensitive currencies such as the kiwi had been supported by St. Louis Federal Reserve President James Bullard who hinted interest rate hikes may not begin until 2012. Bullard becomes a voting member on the Federal Open Market Committee in 2012.

“The weak housing data out of the U.S. shot equities and commodity prices were pared right back,” said Mike Jones, strategist at Bank of New Zealand. “We’re still seeing demand to buy the kiwi on dips.”

The kiwi slipped to 74.55 U.S. cents from 74.66 cents yesterday and dropped to 66.34 on the trade-weighted index, or TWI, a measure of the currency against a basket of five partners, from 66.40. It rose to 66.67 yen from 66.55 yen yesterday and increased to 80.22 Australian cents from 80.12 cents. It declined to 49.86 euro cents from 50.02 cents yesterday, and pushed up to 44.55 pence from 44.38 pence.

Jones said the currency may trade between 74.10 U.S. cents and 75 cents today, and will probably continue to range-trade.

The Bank of England’s November minutes showed the central bank was split over its decision to extend quantitative easing buy 25 billion pounds, with seven members in favour, one preferring a 40 billion pound rise and one who voted no change. The bankers also discussed a cut to the remuneration rate on bank reserves.

Businesswire.co.nz

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