By Dan Bell
The NZD/USD touched 0.8470 overnight – a 6-month high, in a somewhat volatile trading session. The NZD/USD currently trading around 0.8380.
The NZD/USD and other ‘risky assets’ such as Equities, Gold, and Base Metals all got an initial boost after 800 banks borrowed EUR 530 billion, slightly more than expectations, from the European Central Bank’s Long Term Refinancing Operation.
The ECB has now injected over EUR 1 trillion into the EU financial system over the past 2 months, averting the threat of a credit crunch and raising hopes that credit will flow to businesses and that borrowing costs will ease for EU governments.
The rally in risky assets was soon reversed when the US Federal Reserve chairman Ben Bernanke was cautiously optimistic on the US economy.
He suggested the Fed was unlikely to engage in more monetary easing via bond purchases (i.e. QE 3), made encouraging comments on the employment and manufacturing markets, and even noted some improvement in the battered US housing sector. This sparked a board-based USD rally which pulled the NZD down from its highs.
The 19-commodity CRB Commodity Index was 0.25% lower on the day. Gold prices spiked to USD$1790 before falling 4.3% to USD$1712 per ounce. Like Gold, Copper prices pushed to a 2-week high before falling 1% - with other base metals falling similar percentages. Oil prices also ended lower on the day.
Equity markets were marginally lower across the board overnight. The US S&P500 currently down 0.25%, while the Dow Jones Index is 0.15% lower.
The NZD opens at 0.8380 USD, 0.7785 AUD, 0.6280 EUR, 0.5260 GBP, & 68.00 JPY.
On the local front we get Overseas Trade Index at 10:45am. From Australia we get Building Approvals and Private Capex at 1:30pm, following by Chinese Manufacturing PMI at circa 2.00pm.
Enjoy the first day of Autumn – pity we had to skip the summer.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
(Updated with Dow close)
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