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90 seconds at 9 am with BNZ: NZ$ hits yen high as Bank of Japan prints again; NZ$ hits 53p as UK rating outlook cut; Greek nerves back; US retail sales disappoint
Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the Bank of Japan surprised markets late yesterday when it announced plans to print money to buy around US$130 billion of government and other bonds.
This latest bout of Quantitative Easing (QE) or money printing by a major central bank reinforces the fears of those who aren't printing money that their currencies will be driven ever northward by investors who can borrow at near 0% interest rates in the currency that is being printed and invest in other currencies with higher interest rates such as Australia and New Zealand where central banks are not printing.
This is known as the 'carry trade' and is generating fear for many with commodity-linked currencies of 'currency wars' where 'beggar thy neighbour' policies spark a race to the bottom. See more on the Bank of Japan move here at Reuters.
The New Zealand dollar rose yesterday to a 5 month high of almost 65 yen. See our currency charts below, which also show the New Zealand dollar rising on a Trade Weighted Index basis to a six month high.
Meanwhile, the nerves are back in Europe. A meeting of European ministers to decide on Greece's bailout meeting was canceled overnight with Greece's donors still unconvinced that Greece will carry out the budget cuts agreed to in parliament earlier this week.
European ministers are demanding written assurances and details of €325 million of budget cuts agreed to, but not implemented, by Greece's parliament. Time is short with any bailout deal having to be finalised by the end of this week or Greece is likely to default on a €14.5 billion debt repayment due on March 20. That would trigger a disorderly default and could force Greece to exit from the euro. See more here at Reuters.
Also increasing the nervousness in Europe, Moody's cut its credit ratings for Spain, Portugal and Italy late yesterday and said it may cut the ratings of France, Austria and Britain. See more here at Reuters.
The New Zealand dollar firmed to a near record high of 53 pence overnight. The Bank of England announced its own fresh round of money printing last week, adding to the pressure of the carry trade on non-printing currencies like the New Zealand and Australian dollars.
Meanwhile, US retail sales grew by a weaker-than-expected 0.4% in January as consumers remain cautious, particularly about buying new cars. The Dow as down 0.7% in late trade, which saw the New Zealand dollar off its highs versus the US dollar at around 82.8 USc in mid-morning trade. See more here at Bloomberg.