By Dan Bell
The NZD/USD made an 8 month low of 0.7384 overnight as ongoing concerns in Europe keep risk aversion in play. We open around 0.7400 this morning.
Sentiment turned negative yesterday afternoon after a weaker than expected China Flash Purchasing Managers Index came in at a 32 month low and reports that the restructuring of large European bank Dexia was hitting the skids.
Risk appetite deteriorated further when Germany failed to complete an auction of new 10-year government bonds- they intended on selling 6bn worth but only managed to sell 3.65bn.
Markets are concerned this might be a sign the sovereign debt crisis is spreading into the core EU economies and questions the perceived safe haven status of German bonds. France was also in focus receiving a warning from one of the credit rating agencies that they might be at risk of losing their AAA credit rating if they don’t get their finances in order.
Global stocks are weaker across the board with the US currently down 1.8% with another 90 mins before the NYSE close. Commodities are also off with the CRB Index down 1.36%.
The US Dollar continues to benefit from safe haven demand. The AUD/USD dropped over 1% overnight to a low of 0.9660.
The NZD is stronger against the AUD this morning and opens around 0.7620 and is relatively unchanged against the other majors at 0.5540 EUR, 0.4760 GBP and 57.20 JPY.
On the local front Trade Balance numbers are released at 10:45 this morning. From Australia RBA Gov Stevens is speaking this evening.
It’s Thanksgiving Day in the US today so no value today transactions. And markets are expected to be quiet tonight.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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