Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search


NZ Dollar Falls as Global Stocks Tumble

NZ Dollar Falls as Global Stocks Tumble, Risk Aversion Returns

By Paul McBeth

Dec. 2 – The New Zealand dollar extended its decline as global stocks tumbled on concern the U.S. economy is heading for a prolonged recession, discouraging investment in higher-yielding, or riskier assets.

The U.S. economy sank into recession a year ago, with the fall in employment of 1.2 million people the main factor in determining the contraction, the National Bureau of Economic Research said on its website. The Standard & Poor’s 500 Index fell 5.4%, halting a five-day rally. Germany’s DAX 30 index dropped 5.9% as weak manufacturing figures in the U.S. drove European stocks down.

“Investors shunned the kiwi in favour of safe havens like the yen and the U.S. dollar,” said Danica Hampton, currency strategist at Bank of New Zealand. Last week’s optimism has reversed as investors’ appetite for risk waned, she said.

The kiwi fell to 53.49 U.S. cents from 53.56 cents yesterday, and dropped to 49.96 yen from 50.69 yen yesterday. It dropped to 82.80 Australian cents from 83.16 cents yesterday.

Hampton said the kiwi may trade between 53.25 U.S. cents and 53.80 cents today. The yen rose to a one-month high against the U.S. dollar as investors repatriated their funds away from higher-yielding assets. It fell to 93.16 yen per U.S. dollar from 94.16 yen yesterday. The kiwi fell below 50 yen for only the second time since the terrorist attacks in 2001.

The Reserve Bank of Australia will review its benchmark rate today, and is expected to cut rates by 75 basis points to 4.5%. Australia’s September balance of payments and October retail sales figures will be released before the central bank makes its announcement.

In New Zealand, Reserve Bank Governor Alan Bollard will review the official cash rate later this week, and expectations are growing that he will cut the OCR by 150 basis points to 5%. In July, Bollard embarked on the steepest series of rate cuts since the implementation of the benchmark rate in 1999.

Hampton said the slew of interest rate cuts worldwide may restore sentiment in financial markets though they could also be read as a sign of a deepening global economic slump.



© Scoop Media

Top Scoops Headlines


Philip Temple: Hang On A Minute, Mate
Peter Dunne quietly omits some salient facts when arguing for retention of MMP’s coat-tailing provision that allows a party to add list seats if it wins one electorate and achieves more than 1% or so of the party vote... More>>

Cheap Grace And Climate Change: Australia And COP26

It was not for everybody, but the shock advertising tactics of the Australian comedian Dan Ilic made an appropriate point. Australia’s Prime Minister Scott Morrison, a famed coal hugger, has vacillated about whether to even go to the climate conference in Glasgow. Having himself turned the country’s prime ministerial office into an extended advertising agency, Ilic was speaking his language... More>>

Binoy Kampmark: Funeral Rites For COVID Zero
It was such a noble public health dream, even if rather hazy to begin with. Run down SARS-CoV-2. Suppress it. Crush it. Or just “flatten the curve”, which could have meant versions of all the above. This created a climate of numerical sensitivity: a few case infections here, a few cases there, would warrant immediate, sharp lockdowns, stay-at-home orders, the closure of all non-vital service outlets... More>>

Dunne Speaks: Labour's High Water Mark
If I were still a member of the Labour Party I would be feeling a little concerned after this week’s Colmar Brunton public opinion poll. Not because the poll suggested Labour is going to lose office any time soon – it did not – nor because it showed other parties doing better – they are not... More>>

Our Man In Washington: Morrison’s Tour Of Deception

It was startling and even shocking. Away from the thrust and cut of domestic politics, not to mention noisy discord within his government’s ranks, Australian Prime Minister Scott Morrison could breathe a sign of relief. Perhaps no one would notice in Washington that Australia remains prehistoric in approaching climate change relative to its counterparts... More>>

Binoy Kampmark: Melbourne Quake: Shaken, Not Stirred

It began just after a news interview. Time: a quarter past nine. Morning of September 22, and yet to take a sip from the brewed Turkish coffee, its light thin surface foam inviting. The Australian city of Melbourne in its sixth lockdown, its residents fatigued and ravaged by regulations. Rising COVID-19 numbers, seemingly inexorable... More>>