By Dan Bell
The NZD/USD is down over 150 basis points and opens around 0.7810 this morning as risk aversion flares up around the world.
Italian borrowing costs as measured by their 10 Year Government Bond Yield rose above 7% to make a Euro era high of 7.46% before closing around 7.25%. These levels are seen as unsustainable given Italy’s debt burden is over 1.8 trillion euros!
The EUR/USD is trading around 1.35 while the AUD/USD is down to 1.0140 after trading as high as 1.04 yesterday.
US stock markets are down over 3.5% as I write with another 30 mins before the NYSE closes. Commodity prices are down across the board with the CRB Index off over 1%.
Christine Lagarde, head of the International Monetary Fund, told a financial forum in Beijing that Europe's debt crisis risked plunging the global economy into a Japan-style "lost decade".
The NZD has had a mixed night against the major cross rates and opens at 0.5770 EUR, 0.4910 GBP, 0.7695 AUD and 60.80 JPY.
On the local front we get the RBNZ Financial Stability Report at 9am and NZ Business PMI at 10:30. From Australia we get Employment numbers at 1:30 NZT.
With the big moves overnight we are expecting the market to be extremely volatile today.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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