By Dan Bell
Yesterdays risk aversion sell off had NZD/USD make an interbank low around 0.8110 before traders came in and took the NZD back up to a high of 0.8219 within four hours last night. We open this morning back under 0.8200 after Moody's cut Irelands credit rating.
The big driver yesterday was concerns the European debt crisis was spiraling out of control with the potential spill over from Greece woes into the much larger economies of Italy and Spain.
This morning credit rating agency Moody's cut Ireland's credit rating to junk status, saying the country will likely need additional rounds of official financing before it can return to international capital markets.
Global equity and commodity markets have had a mixed night with most equity markets weaker overnight with the Dow -0.47% while most commodities are higher with the CRB Index up 1%.
Some US Federal Reserve officials are ready to provide more monetary policy easing if the recovery is too sluggish to cut the lofty U.S. unemployment rate and if inflation eases as expected, minutes of their June meeting released on Tuesday show. Others disagreed and said that if recent increases in inflation do not moderate, the Fed should consider tightening policy sooner than expected.
The EUR/USD made a four month low of 1.3836 but recovered to just under1.40. The AUD/USD made an interbank around 1.0525 but has also bounced back to 1.06 this morning.
The NZD is lower against most of the major cross rates. After trading over 0.5900 against the EUR we are lower this morning around 0.5850. Against GBP we open around 0.5140. With the risk aversion driving things over the last few days the JPY has benefited from safe haven flows and has the NZD lower at 64.80 this morning and against the AUD we open in the low 0.7700’s.
Today the focus will be on a raft of economic data from China, including GDP, Industrial Production and Retail Sales all released at 2pm NZT.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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