NZ dollar extends decline as Syrian conflict erodes investors’ risk appetite
By Paul McBeth
Aug. 28 (BusinessDesk) - The New Zealand dollar extended its decline in local trading as the growing likelihood of a Western military strike on Syria erodes investors’ appetite for higher yielding, or riskier, assets.
The kiwi dollar fell to 77.67 US cents at 5pm in Wellington from 77.98 cents at 8am and 78.13 cents yesterday. The trade-weighted index fell to a two-month low 73.08, trading at 73.33 at 5pm from 73.79 yesterday.
Oil and precious metal prices rallied as investors flocked to safe haven assets amid heightening tensions in the Middle East. The US, UK and France look increasingly likely to approve a military strike on Syria in retaliation to the regime’s presumed use of chemical weapons on civilians.
That’s spooked financial markets around the world, and Asian stocks followed US and European bourses lower, as Australia’s S&P/ASX 200 index dropped 1.1 percent at 5pm in Wellington, Hong Kong’s Hang Seng declined 1.7 percent, and Japan’s Nikkei 225 index fell 2.3 percent.
“It’s all about Syria and the impending missile strike – that’s what’s really driving the market,” said Michael Johnston, senior dealer at HiFX in Auckland. “There’s a big uptick in risk aversion” which has sapped demand for the local currency, he said.
HiFX’s Johnston said the kiwi may trade between 77.25 US cents and 78.40 cents and he expects it to fall into the mid-76 US cents range.
The kiwi didn’t react to news New Zealand government officials found no signs of botulism-causing bacteria in the Fonterra Cooperative Group whey protein concentrate, rather it was a non-toxic variety.
The local currency dropped to 75.33 yen from 76.76 yen yesterday, and was little changed at 87.07 Australian cents from 87.03 cents. It declined to 58.03 euro cents from 58.41 cents, and decreased to 49.99 British pence from 50.15 pence.