By Dan Bell
The NZD/USD gapped lower to 0.8225 this morning on new of the Cyprus bailout.
The NZD/USD had rallied to 0.8278 high Friday night/Saturday morning. This was before the news on Sunday that Cyprus would have to accept an unprecedented tax on bank deposits in return for international aid, or else faced bankruptcy.
This has caused a significant ‘risk off’ environment - the EUR/USD fell 130 points & NZD/USD 50 points immediately on the market open.
The tax , 6.75% on all deposits up to EUR 100,000 and 9.9% above that, still needs Parliamentary approval. The Cyprian authorities will be attempting to get this done early Monday.
There is a concern that this will set a precedent for other periphery countries which could potentially result in ‘runs on banks’ and other systemically worrying events. This will become more apparent once the euro-zone banking system reopening Monday.
Gold price closed marginally higher atUSD$1592 an ounce. Base metal prices all traded lower.
World equity markets were lower across the board.
The NZD opens at 0.8225 USD, 0.7945 AUD, 0.6360 EUR, 0.5440 GBP, & 77.60 JPY.
Westpac Consumer Sentiment figures will be released at 10:00am.
Tonight will be all about Cyprus and whether the panic will spread to other periphery nations.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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