NZ dollar falls as copper price slump adds to risk aversion
"Copper prices had their biggest single daily fall in about five years – it was pretty dramatic."
"Copper prices had their biggest single daily fall in about five years – it was pretty dramatic."
The New Zealand dollar fell after a slump in copper prices affirmed investors' aversion to risk-sensitive assets such as the kiwi, following concern over the global outlook as cheap oil stamps out inflation.
The local currency dropped to 77.02 US cents at 5pm in Wellington from 77.18 cents at 8am and 77.86 cents yesterday. The trade-weighted index declined to 78.63 from 79.24.
Copper prices sank as much as 8.7 percent today to below US$5,400 a tonne after a World Bank report cut its global growth forecast, sapping demand for commodity-linked currencies such as the Australian and New Zealand dollars. The kiwi was the worst performer against the greenback during Northern Hemisphere trading as it drifted from recent post-float highs on other cross-rates as investors revert to safe-haven assets such as the yen in the face of falling oil prices.
"Copper prices tanked about 9 percent and had their biggest single daily fall in about five years – it was pretty dramatic," said Raiko Shareef, currency strategist at Bank of New Zealand in Wellington. "As a result, the Aussie dollar got whacked by 70 points and the kiwi followed suit."
BNZ's Shareef said the kiwi has found support just above 77 US cents, and traders will be watching US retail sales to gauge the strength of the world's biggest economy.
New Zealand government figures today showed core retail spending on electronic cards rose last month, though fuel spending dropped to a 19-month low on cheap oil. Separately, Quotable Value figures showed New Zealand property rose 4.9 percent in 2014, slowing from the 10 percent pace in 2013, as higher interest rates, home-loan restrictions and the uncertainty of a general election weighed on the market.
The local currency sank to 90.48 yen from 91.84 yen yesterday, and was little changed at 95.18 Australian cents from 95.10 cents. It declined to 65.42 euro cents from 65.72 cents, and dropped to 50.84 British pence from 51.29 pence. The kiwi fell to 4.7732 Chinese yuan from 4.8307 yuan yesterday.
The two-year swap rate decreased to 3.725 from 3.73 yesterday, and the 10-year swap was 3.835 from 3.88.
(BusinessDesk)