Kiwi slumps as sentiment sours
Market Highlights
New Zealand: NZD/USD Past 5 days
International: EUR/USD Past 5 days
Today's commentary
The Kiwi was battered yesterday as continuing bad news and poor equity market performances saw investors become even more risk adverse.
Yesterday’s local session saw the Asia-Pacific stock markets continue the decline of their US and European counterparts with all the major markets suffering. Fuelled by the uncertain fate of the ‘Big Three’ US auto makers, worldwide equity markets have been in full retreat over the last week, causing massive shifts in investor sentiment. The main benefactors from this shift continue to be the ‘safe haven’ currencies, with both the JPY and USD strengthening despite their recent poor local news as investors buy the yen and US Government bonds. Unfortunately the high-yield currencies are the big losers, with the Kiwi and AUD both tumbling against the majors.
With the recent data confirmations making recessions a reality for the world’s major economies, the question now becomes how bad will it be? Data released overnight in the US showed that it could be very bad – the number of US workers filing unemployment claims leapt in October to a 16 year high, with the expectation that December’s payroll figures will add substantially to the 1.2 million who have already lost their jobs this year. With Mid-Atlantic production figures also falling in November (to an 18-year low) it looks like the US economy’s recession could last at least 12 months.
It’s not all doom and gloom however - late in the offshore session a proposed rescue package for the US auto industry saw a rally on Wall St, and should it become a reality investors might have a reason to feel confident once again.
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