By Bernard Hickey
Here's my weekly currencies review and outlook with HiFX's Senior Dealer Dan Bell, including a look at the New Zealand dollar's dip below 80 USc after weak US jobs data on Friday night.
Bell says the figures were weaker than expected, but not weak enough to suggest an overwhelmingly strong stimulative response from the US Federal Reserve. That reduced appetities for risk, which are perversely correlated with the strength of stimulus measures taken by central banks to restart weak growth.
He also talked about growing concerns within the Euro-zone about the recent support programme announced at a leaders summit late last month. Markets were also disappointed with a lack of fresh action from the European Central Bank to lend cheap new funds to struggling European banks.
We talked about a spike in Spanish and Italian bond yields and how the positive sentiment from the summit had evaporated -- again.
"The whole thing lacks credibility," he said, pointing to objections from German, Finnish and Dutch leaders over details of a rescue package agreed at the summit and potential delays in getting rescue funds in place.
The New Zealand dollar looks something of a safe haven compared to the euro. It rose to a record high vs the euro of almost 65 euro cents over the last week.
The Kiwi is also firm against the British pound where the Bank of England agreed late last week to print an extra 50 billion pounds.
"For all those people sitting on pounds and waiting for the pound to get back to 3 to 1 might be waiting a long time," he said.
We also talked about signs of a slowing Chinese economy, and how this was pressuring the Australian economy and interest rates there.
Bell said however that recent Australian economic data and commentary from the Reserve Bank of Australia had been slightly more robust than expected, which made the Australian dollar relatively more attractive than the New Zealand dollar.
"It seems the New Zealand dollar may have topped out against the Australian dollar for now," he said.
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Dan Bell is the Senior Dealer at HiFX, a UK-headquartered foreign exchange dealer with significant operations in Australia and New Zealand. It has a dealing room in Auckland. See more detail here.