NZ dollar drops as heightened credit fears weigh on risk appetite
By Paul McBeth
Feb. 9 (BusinessDesk) - The New Zealand dollar fell as investors grew increasingly wary of corporate credit risk, sapping their appetite for risk-sensitive assets such as the kiwi.
The local currency fell to 65.89 US cents at 5pm in Wellington from 66.35 cents at 8am and 66.33 cents yesterday. The trade-weighted index declined to 71.90 from 72.33.
Stocks across Asia followed Wall Street lower and US and Japanese government bonds rallied as investors sought out relatively safe assets on fears companies may default on a growing pool of debt. That eroded demand for risk-sensitive assets such as the kiwi, which had already been dented after US jobs data on Friday was interpreted as keeping intact the Federal Reserve's plans to raise interest rates.
"Credit risk is perceived to have worsened considerably in the last few days," said Imre Speizer, senior market strategist at Westpac Banking Corp in Auckland. "Those falling interest rates are another strong indicator of risk aversion" and are weighing on the kiwi.
Two-year swap rates fell five basis points to 2.56 percent and 10-year swaps dropped 10 basis points to 3.19 percent, the lowest since records began in 1993.
"New Zealand rates are falling hard on global events," Speizer said.
State-owned valuer Quotable Value data showed local property values rose at a slower pace in January as lending curbs continued to eat into demand in the country's biggest city, Auckland, where a lack of supply and migration-fuelled demand had been pushing up prices to what the Reserve Bank deemed unsustainable.
Concerns about the financial stability of the peripheral European economies such as Portugal, Italy and Greece was also weighing on investors' appetite for risk.
The local currency fell to 58.77 euro cents from 59.57 cents yesterday, and was little changed at 45.66 British pence from 45.71 pence. It dropped to 4.3296 Chinese yuan from 4.3585 yuan yesterday, and dropped to 75.48 yen from 77.74 yen. The kiwi was little changed at 93.58 Australian cents from 93.67 cents yesterday.