By Dan Bell
The NZD/USD opens this morning at 0.8045, having hit a 1-month low of 0.8032 overnight.
Fonterra announced yesterday a lowered forecast payout to farmers for the 2012/2013 season – the high NZD was sited as the primary cause. The NZD/USD promptly dropped 25 points, and this sell off continued overnight, with the NZD/AUD also giving up some of its recent gains.
Finance Minister Bill English was interviewed in Hong Kong last night. His key points were:
- NZ will be affected by China’s slowing economy sooner or later
- NZ Govt would not be taking any action to help Fonterra
- NZ Govt is “relatively concerned” about the strong NZD, they can’t do much about it, & “we have to learn to live with it.”
Investors await a key speech by Fed Chairman Ben Bernanke at the Jackson Hole central bankers meeting later this week. It is speculated he will discuss a 3rd round of ‘quantitative easing’ (ie monetary stimulus), but will be vague on the timing.
The EUR/USD strengthened on news ECB President Draghi cancelled his appearance at the Jackson Hole meeting this week, citing a heavy work load. This has been interpreted that he is busy finalising the details of policy proposals to contain the EU debt crisis.
The AUD/USD slid to a near 5-week low of 1.0350 on continuing worries of a slowing Chinese economy.
Spanish region of Catalonia has requested a EUR 5 billion bailout – the 2nd of 17 regions to do so.
Global equity markets were weaker across the board. The US equity markets dropped circa 0.2%, whilst the European markets fell circa 1.0%. The Shanghai Composite Index (SSEC) managed to rise 0.85%, but is still showing significant losses for 2012.
Oil prices rose 0.2% in choppy trading, while Gold gave up some of their recent gains and dropped to USD$1666. Copper prices fell again to USD$7,605 a tonne, and were other base metals prices also weaker, with Nickel & Tin being the biggest losers (down 1.4% & 1.0& respectively).
The NZD opens at 0.8045 USD, 0.7755 AUD, 0.6405 EUR, 0.5085 GBP, & 63.15 JPY.
There is no domestic data is scheduled today.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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