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NZ Dollar Down Amid Turmoil On World Markets

Fuseworks Media
Fuseworks Media

Wellington, March 18 NZPA - As turmoil engulfed world markets, the New Zealand dollar fell sharply against the greenback and hit new multi-month lows against the yen and euro.

The financial chaos continuing throughout global markets had substantially increased risk aversion, leading many participants to further scale back exposure to fringe markets, ANZ bank said today.

The kiwi had fallen victim to heavy exiting from carry trades, in which investors borrow low-yielding currencies such as the yen, to invest in higher-yielding but riskier assets such as the kiwi.

After briefly topping 79 yen last night, the NZ dollar dropped below a seven-month low of 76.80 yen early today. By 8am it was buying 77.51 yen.

Similarly against the euro, the kiwi got down to a four-month low around 0.5035 early today, from 0.5086 at 5pm yesterday, before regaining some lost ground to 0.5058 at today's local open.

The kiwi was also buying US79.55c at 8am today, having been at a week-low of US79.24c a few hours earlier, from US80.55c at yesterday's local close.

Against the Australian dollar, the kiwi was buying A86.74c at 8am from A87.20c at 5pm yesterday. The trade weighted index was down to 70.51 from 70.96.

ANZ said events on world markets were driving a flight to liquidity and safety.

Those most at risk were nations running large current account deficits that were hugely reliant on offshore capital, including New Zealand.

The US dollar tumbled to a 12-1/2-year low against the Japanese yen overnight and record levels against the euro and the Swiss franc as emergency liquidity-boosting measures by the Federal Reserve over the weekend failed to ease worries about the US financial sector.

The greenback sold off in reaction to the Fed cutting its discount rate by 25 basis points to 3.25 percent on Sunday (local time) and opening up discount window lending to major investment banks, a tool not used since the Great Depression.

The US dollar fell as low as 95.77 yen according to Reuters data , and set a historic trough at 0.9637 Swiss francs after breaking below parity last week.

Short-term US Treasury yields fell to five-year lows as investors expect the Fed could slash overnight rates by up to 100 basis points by the end of its policy meeting on Tuesday (local time).

NZPA WGT Reuters mjd nb

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