Dollar hits two-week low as risk appetites dwindle

Thursday 3rd September 2009

The New Zealand dollar fell to a two-week low after a report showed US companies shed more jobs than expected last month and factory orders rose less than forecast, driving down stocks on Wall Street and sapping investors’ appetite for higher yields.

US stocks fell after the ADP Employer Services payroll report showed American companies cut 298,000 jobs in August, more than 250,000 forecast by economists, and Commerce Department figures showed factory orders climbed a less-than-expected 1.3%.

The yen climbed to a seven-week high as investors eschewed riskier assets in the face of the more pessimistic outlook.

“The global theme is one of risk aversion – there’s been a huge increase in safe haven flows like Treasuries, gold and the yen,” said Khoon Goh, senior markets economist at ANZ National Bank. “The failure of the kiwi to break 69 US cents was a significant one for the currency. Once you reach the top the only way is down.”

The kiwi fell as low as 66.83 US cents from 67.43 cents yesterday and recently traded at 67.27 cents. It dropped to 62.43 on the trade-weighted index, or TWI, a measure of the currency versus a basket of five trading partners, from 62.74 yesterday, and declined to 61.99 yen from 62.54 yen. It sank to 80.62 Australian cents from 81.09 cents yesterday, and decreased to 47.16 euro cents from 47.39 cents.

Goh said the currency may trade between 67.10 US cents and 67.80 cents today with the downbeat global outlook likely to drag on the kiwi.

The Australian dollar rose to 83.40 US cents from 83.14 cents yesterday despite the pessimism, and investors’ sentiment for the trans-Tasman currencies may be diverging, Goh said.

The so-called lucky country’s economy grew 0.6% in the three months ended June 30, beating economists’ expectations of 0.2% growth in the quarter. Australia managed to avoid a recession in the global slump, and its unemployment rate is now below New Zealand’s while its interest rates are higher.

Diary prices soared 24% on Fonterra’s online auction platform yesterday, and the price of raw materials is expected to continue to gain when ANZ National releases its commodity price index today.

Businesswire.co.nz

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