Dollar gains vs. Australian dollar on Chinese stock rout
Kiwi rose as high as 90.91Ac cents.
The New Zealand dollar rose to a six-and-a-half week high against its transtasman counterpart after a slump in Chinese equities markets weighed more heavily on the currency of Australia, which counts China as its biggest export market.
The kiwi rose as high as 90.91Ac cents, and was trading at 90.71Ac at 8am in Wellington from 90.36Ac yesterday. It gained to 66.06USc from 65.88USc yesterday.
The Chicago Options Board Exchange's Volatility Index, known as Wall Street's 'fear gauge,' rose to a two-week high as stocks fell on Wall Street and in Europe after an 8.5% slump in China's Shanghai Composite index yesterday. The prospect of a slowing Chinese economy is weighing on exporters such as Australia and New Zealand, which rely on the world's second biggest economy buying their raw materials. Prices for iron ore, Australia's biggest commodity export, have been under pressure over the past week.
"Chinese stocks plunged and took other stocks with them around the world," said Imre Speizer, senior market strategist at Westpac Banking Corp in Auckland. Should the kiwi hold its gains against the Aussie, "then it signals further gains in the days ahead."
Mr Speizer said the kiwi could rise to as high as 91.50Ac cents in the short-term.
Traders are awaiting Reserve Bank governor Graeme Wheeler's speech on the outlook for New Zealand's economy tomorrow, when he's expected to provide more guidance to the market after the currency gained following last week's rate cut.
The market is pricing in 42 basis points of interest rate cuts to the 3% official cash rate over the coming 12 months, according to the Overnight Index Swap curve.
The kiwi was little changed at ¥81.36 yen at 8am in Wellington from ¥81.34 yesterday, and fell to 59.49 euro cents from 59.85 cents yesterday. The currency was almost unchanged at 42.45 British pence, from 42.42p. The trade-weighted index inched up to 70.30 from 70.22 yesterday.
(BusinessDesk)
Paul McBeth
Tue, 28 Jul 2015
Tue, 28 Jul 2015
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Dollar gains vs. Australian dollar on Chinese stock rout
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