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The Opening Bell: Where currencies start for Tuesday, May 15, 2012

Currencies
The Opening Bell: Where currencies start for Tuesday, May 15, 2012

By Dan Bell

The NZD/USD remains under pressure and opens at 0.7770 as Euro zone woes continue to weigh on market sentiment.

The market continues to question the situation in Greece - heightened speculation that Greece may leave the EU, and what impact this would have on global financial markets.

During periods of uncertainty like this investors are less willing to NZ Dollars.

The USD is stronger across the board as the market takes cover in US government bonds. US 10 Year Treasuries hit a 7 month low of 1.78% as a result.

Spanish 10 Year bond yields rose to 6.29% after an auction overnight- while Italian bond yields spiked 28 bps to 5.75% - as investors demand higher yields to buy EU government bonds.

News that China dropped the Reserve Requirement Ratio (RRR) for their banks would ordinarily provide support to the Kiwi and Aussie dollars - but overnight the market focused on weaker economic data from China as confirmation their economy (and Asia in general) continues to slow.

Commodities continue to decline - with the CRB Index down 1.15% - at its lowest level since 2010.

Oil prices continues to slide down 2.04% - copper was slammed down 3.54% - even gold - our old so called ‘safe haven’ friend was down 1.55%.

The AUD/USD broke under parity for the first time in 5 months- and opens around 0.9950 while the EUR/USD continues to fall and opens at 1.2830 this morning.

The NZD is weaker against most major cross rates and opens at current indicative mid rates - 0.78 AUD, 0.4830 GBP, 0.6055 EUR, 62.09 JPY.

Not much to report from NZ today. Fonterra milk auction results overnight. From Australia we get RBA Monetary Policy Meeting minutes at 1:30pm - these are the minutes following the surprise 50bps rate cut so should be interesting.

Tonight we get a raft of US data- Retail Sales, Empire State Manufacturing, TIC Long Term Purchases. FOMC voting member Duke is speaking at an event. Top US analysts are expecting the Fed to launch QE3 this year again so FOMC rhetoric will get more focus over coming weeks.

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

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