Here's our summary of the key news overnight in 90 seconds at 9 am, including in an unexpected move yesterday afternoon the Reserve Bank issued a statement quoting Governor Graeme Wheeler saying the level of the New Zealand dollar is unjustified and unsustainable, and it’s susceptible to a significant downward adjustment over the next six to nine months.
Wheeler’s comments saw the Kiwi drop under US80 cents for the first time since September 9 last year. Having been at US80.7c 24 hours ago, the NZ$’s now at about 79.25c. Over the same time period it’s down to A90.20c from A90.9c, with the Trade Weighted Index at 77, versus 78.2 24 hours ago.
The Reserve Bank’s statement has led to suggestions it’s a pre-emptive explanation for why it has intervened in the currency markets with figures on the level of its foreign currency holdings at the end of August due for release on Monday. In late August there was speculation the Reserve Bank had intervened to try and weaken the New Zealand dollar.
And BNZ economists suggest Wheeler's statement opens the possibility of an extended campaign of currency intervention.
Meanwhile, in Australia their Reserve Bank Governor Glenn Stevens thinks Reserve Bank of New Zealand type macro-prudential tools to cool the housing market are either a great idea or a terrible one, depending on which Fairfax publication you read. The Age focuses on Stevens suggesting such tools are worthy of serious consideration, and that he’s open to using them.
However, the Australian Financial Review angles its story on Stevens’ less enthusiastic comments, noting he said he was old enough to remember 1970s style limits on home loans and was not “naive enough to believe these kind of tools are any kind of panacea or permanent solution.”
US shares had their biggest fall in eight weeks, thanks to Apple’s problems and concern Russia could seize foreign assets. Apple shares were down 3.4% and the S&P 500 index dropped 1.4%, the Dow Jones Industrial Average fell 1.4%, and the Nasdaq 1.9%.
Apple withdrew its iOS 8.0.1 mobile software update after it caused customers to lose cellular service, and the company also has issues with some of its new 6 Plus phones bending. It’s preparing iOS 8.0.2 with a fix for the software issue.
China has uncovered nearly US$10 billion in fraudulent trade including numerous irregularities in the port of Qingdao. Companies “faked, forged and illegally re-used” documents for exports and imports, Wu Ruilin, a deputy head of the State Administration of Foreign Exchange's inspection department, said. The trades had “increased pressure from hot money inflows and provided an illegal channel for criminals to move fund,” he added. Industrial metal prices such as copper fell and the yuan weakened after the announcement.
Data out in the euro-zone showed lending to households and companies contracted for the 28th month in a row in August, as questions over whether the European Central Bank’s efforts to stimulate the economy will actually work continue.