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NZ Dollar Slide Continues As Risk Aversion Rises

Fuseworks Media
Fuseworks Media

Wellington, May 12 NZPA - The New Zealand dollar continued its recent slide, with risk aversion rising as US stock markets took a tumble.

From US77.20c against the greenback at 5pm on Friday, the kiwi dipped to its lowest point in 3-1/2 months against the US currency around US76.50c early Saturday, then pulled back up to US76.81c by 8am today.

Against the Australian dollar, the kiwi hit a 21-month low around A81.35c, before managing to claw back to A81.75c by today's local open. At Friday's local close it was at A82.08c.

Bank of New Zealand currency strategist Danica Hampton said the NZ dollar had the dubious honour of being the worst performing currency last week, falling about 1.8 percent against the aussie, 2 percent against the greenback and 4 percent against the yen.

The NZ dollar got to a six-week low near 78.50 yen, but was back up to 79.14 yen by 8am today from 79.93 on Friday evening.

Against the euro, the kiwi sunk to a 3-1/2-week low below 0.4950 from 0.5010 at Friday's local close. By 8am today the NZ dollar was buying 0.4963 euro. The trade weighted index was down to 68.68 at 8am today from 69.11.

Ms Hampton said the primary catalyst for last week's weakness in the NZ dollar was the softer than expected employment data which prompted speculation the Reserve Bank would cut interest rates sooner rather than later.

Then overnight Friday sharp losses in US stock markets and rising risk aversion saw the NZ dollar fall against the yen, which also dragged down the kiwi against the greenback.

Steady selling of the NZ dollar against the aussie also weighed on the kiwi cross with the US currency, Ms Hampton said.

During the past week, heavy selling of the NZ dollar had been noted from a wide variety of players including Japanese margin accounts, short term speculative players and model-driven funds, as well as more medium term real money accounts.

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