By Dan Bell
The NZD/USD was under pressure overnight dropping under 0.7600 as EU sovereign debt concerns continue to weigh on global markets.
Spain’s 10 year government bond yields have spiked to almost 7% after lacklustre demand at their bond auction last night- in comparison NZ 10 year yields are under 4% at the moment.
US stocks are down almost 2% this morning (S&P -1.97%) while commodities are off large with the CRB Index down 2.3% led by oil prices which are down 3%- even precious metals have been hammered with silver down 7% and gold off 3.2%.
The European bond market continues to lead global risk sentiment - as sentiment worsens yields go up - which is making people more nervous by the day - which makes yields go up even more- not a good cycle!
Even the German and UK’s bond markets which have been seen as relative safe havens, have seen their yields up over night with their 10 year bond yields gaining 8 basis points overnight.
The AUD/USD dipped under parity and the EUR/USD is under 1.35 as investors bail out of global currencies back into US dollars.
The NZD is weaker against the European cross rates this morning and opens around 0.48 GBP and 0.5615 EUR. With global investors cashing out of long currency, commodity and equity positions, smaller less liquid currencies like the NZD tend to drop more abruptly than larger EU currencies , despite the fact we have much better economic fundamentals than Europe or the UK!
The NZD is relatively unchanged against the AUD and opens around 0.7580/0.7600. With the market now pricing in a small chance of an interest rate cut from the RBNZ in December, the outlook for interest rates is now favoring the AUD over the NZD.
Not much to report on the data front today. We are currently hovering just above key support in the NZD/USD around 0.7550. With another 90 minutes to go before the NY close, further weakness is looking more likely as risk aversion continues.
-------------
Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.