NZ dollar tumbles a second day after China weakens yuan fixing again

Wednesday 12th August 2015

The New Zealand dollar dropped to a new six year low after China's central bank lowered its yuan fixing for a second day, driving down the currency of the nation's biggest trading partner and making it tougher for exporters.

The kiwi fell as low as 64.65 US cents, the lowest since July 2009, and was recently at 65.01 cents, down from 65.52 cents yesterday. The local currency rose to 4.1802 yuan from 4.1396 yuan yesterday.

The Australian and New Zealand dollars dropped sharply after the People's Bank of China set the yuan fixing at 6.3306 against the greenback, 1.6 percent down on yesterday, when it set the midpoint for the yuan at 6.2298 per dollar. The currencies had tumbled yesterday when the PBOC said it was aiming for 2 percent depreciation. China is New Zealand's biggest trading partner, and second biggest export destination behind Australia, meaning a weaker yuan will crimp export receipts in the world's most populous nation.

The weaker fixing effectively "increases the cost of exports to China" for countries that rely on that market such as Australia and New Zealand, said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong. "The fix was a lot lower again from where it was yesterday."

The local currency rose to 89.73 Australian cents from 89.44 cents yesterday, and fell to 81.37 yen from 81.68 yen. It tumbled to 58.74 euro cents from 59.67 cents yesterday, and fell to 41.77 British pence from 42.07 pence. The trade-weighted index was little changed at 70.30 from 70.32 yesterday.

BusinessDesk.co.nz

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