By Dan Bell
The NZD/USD opens at 0.7670 this morning, having peaked out at 0.7751 overnight.
The NZD/USD and other so-called ‘risky assets’ all rallied after a surprised 0.25% interest rate cut by China.
This the first time since 2008 that the Chinese central bank has reduced rates as it attempts to prop up the economy as growth weakens.
The EUR/USD touched a 2-week high after German Chancellor Angela Merkel stated Germany was ready to back euro-zone financial instruments.
Merkel also stated Europe was ready to take action to ensure financial stability in Europe as Spain’s long-term credit rating was cut to BBB, just 2 notches above that classed as ‘junk bonds’.
US Federal Reserve Chairman Ben Bernanke testified before Congress last night. Bernanke did not hint at any additional monetary stimulus the Fed might take to invigorate US economic growth, although he did mention the risk to the recovery from the European debt crisis and uncertainty surrounding US fiscal policy.
The Bank of England left interest rates unchanged at 0.50% and did not expand its QE (quantitative easing) programme.
The US S&P500 index is flat, and Dow Jones up 0.4% on the day, while the European & UK bourse closed higher.
The 19-commodity CRB Commodity Index is essentially flat on the day. Oil prices fell slightly, gold prices tumbled 2% to a low of USD$1580 per ounce before bouncing a touch to USD$1590.
Copper (USD$7,495 per tonne) and most base metals rose on the back of the China interest rate cut news.
The NZD opens at 0.7670 USD, 0.7755 AUD, 0.6105 EUR, 0.4940 GBP, & 61.05 JPY.
There is nothing scheduled on the NZ data calendar today. Australian Trade Balance & Home Loans data will be released at 1.30pm.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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