The Opening Bell: Where currencies start on Thursday, December 1, 2011

The Opening Bell: Where currencies start on Thursday, December 1, 2011

By Dan Bell


The NZD/USD surged overnight to make a high of 0.7820 after G7 Central Banks announce a coordinated strategy to pump liquidity into the global financial system. We open around 0.7780 this morning.

In a joint statement overnight the U.S. Federal Reserve, the European Central Bank and the Central Banks of Canada, Britain, Japan and Switzerland said they had agreed to cut the cost of US dollar money market swap lines by 50 basis points from Dec. 5, in order to ensure that banks outside the United States have easy access to US dollars.

Global markets have rallied across the board with US stocks currently up over 3%, commodities up over 1.5% and most ‘risk positive’ currencies up over 2%.

The US Dollar is weaker across the board with the AUD/USD up 3% to make a high over 1.03- we open around 1.0250 this morning.

China also added to positive sentiment overnight cutting the Reserve Requirement Ratio for their banks by 50bps- the first cut since 2008.

US ADP Employment Report- seen as a precursor to the official Non Farm Payrolls report-night came in much better than expected at +206K new jobs compared to expectations of +131K.

The NZD is up against all the major currencies except the AUD and opens at current indicative levels this morning- 0.7590 AUD, 0.5780 EUR, 0.4970 GBP, 60.20 JPY.

With the significant moves across global markets overnight we are expecting the NZD to be very volatile today.

On the local front we get a couple of second tier releases today with the Overseas Trade Index and Commodity Price Index around midday. From Australia we get Building Approvals and Retail Sales around 1:30 NZT.

We also get Manufacturing PMI from China around 2pm which will be of interest.

Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here

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