NZ dollar falls as trans-Tasman policymakers talk down currencies; European data disappoints
By Paul McBeth
Aug. 8 (BusinessDesk) - The New Zealand dollar extended its decline in the local trading session after policymakers on both sides of the Tasman tried to talk down their respective currencies yesterday, and as weak European data snapped investors from their recent ebullience.
The kiwi fell to 81.17 US cents at 5pm in Wellington from 81.46 cents at 8am and 82.02 cents yesterday. The trade-weighted index declined to 72.99 from 73.54 yesterday.
Investors cashed in some of the recent gains in the kiwi and Australian dollars after New Zealand Prime Minister John Key told Bloomberg News one-way bets on the kiwi were "not a very smart thing to do" and that the central bank had scope to cut rates.
On the other side of the ditch, Reserve Bank of Australia Governor Glenn Stevens said the so-called Aussie remained high in spite of the "decline in terms of trade and the weaker global outlook," when keeping the benchmark interest rate unchanged at 3.5 percent.
"The currency debate is heating up a bit after Key suggested the Reserve Bank can cut rates to cut the effects of a strong exchange rate and the RBA talked up the rhetoric against a strong Aussie dollar," said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong. "That made the market a little bit nervous" and helped bring the trans-Tasman currencies lower, she said.
Appetite for risk-sensitive assets such as the trans-Tasman currencies was dimmed by weaker economic data in Europe, with German factory orders falling more than expected and Italian gross domestic product contracting for a fourth quarter.
Trinh said investors took profit where they could across most risk-sensitive assets, and are now waiting for the central bank gathering at Jackson Hole, Wyoming on Aug. 31, and next month's European Central Bank meeting.
The kiwi fell to 77.03 Australian cents from 77.49 cents yesterday, and declined to 63.77 yen from 64.20 yen. The New Zealand dollar dropped to 65.55 euro cents from 66.19 cents yesterday and decreased to 52.02 British pence from 52.62 pence.