By Dan Bell
Global markets have had another negative night with the NZD/USD dropping to a 7 month low of 0.7526. We open around 0.7540/0.7580 this morning.
Sentiment was already negative after Greece said it would miss its deficit targets this year and worsened after Dexia- a large European bank - was downgraded by Moody’s which sent their shares down 10% and forced an emergency board meeting. Dexia was one of the first European banks to be bailed out in 2008 and holds EUR 21bn in sovereign debt issued by Greece, Italy and other troubled EU countries. They obviously learnt their lesson from the GFC?!!!
The US stock market is currently down 2%, while commodities are generally weaker although gold and silver are up overnight.
The USD continues to strengthen against most major currencies as investors sell out of risk assets and buy US treasuries and other safe haven bonds. The EUR/USD traded to an 8 month low briefly dipping under 1.32 at one stage while the AUD/USD hit a 10 month low of 0.9540!
When the EU debt crisis originally flared up in 2010 the EUR/USD made a low just under 1.19- which is still 10% away from current levels. At the same time the NZD/USD traded to a low of 0.6550.
European debt woes over shadowed better than expected manufacturing data from the US and UK with better PMI’s from both (Purchasing Managers Index). The US also recorded better than expected construction and vehicles sales numbers.
The NZD has had a mixed night against the major cross rates and opens at current indicative levels: 0.7890 AUD, 0.5710 EUR, 0.4890 GBP and 58.00 JPY.
On the local front we get the NZIER Quarterly Survey of Business Option at 10am this morning. From Australia, the RBA announce interest rate policy at 4:30 NZT.
Tonight ECB President Trichet and Fed Chairman Ben Bernanke are speaking.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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