NZ Dollar Decline

09 August 2011 - Which Way to Pay

NZ Dollar Decline

As Wall Street sinks, the New Zealand dollar extends its decline against the greenback subsequent to the US downgrade causing a slump in global equity and commodity markets. Investors are now looking to limit their risk exposure causing western equity markets to fall sharply in a continuation of the selloff that commenced in Asia yesterday.

Standard & Poor further dented the US credit rating one further notch to AA with regard to government clearing houses and mortgage agencies. On Wall Street, S&P’s 500 Index decreased a mighty 6.6% to an 11-month low of 1,119.68. The outlook was echoed globally with Europe’s Stoxx 600 Index tumbling 4.1% to 228.98 and the 19-commodity Thompson Reuters Jefferies CRB Index dropping 2.8% to 317.74.

On the financial instability, Khoon Goh, head of market economics and strategy at ANZ New Zealand said the following; "The world is still trying to figure out what market looks like with the US on a double-A rating... Equity markets' reaction to the downgrade is weighing on kiwi and Aussie as well, and commodity prices are also being watched because they are also getting hit hard,"

The kiwi recently traded at 82.71 US cents, a decrease from 82.97 cents yesterday. On the trade-weighted index of major trading partners' currencies the NZ dollar rose to 71.68 from 71.60. It increased to 80.48 Australian cents from 79.93 cents yesterday, and fell to 63.89 yen from 64.60 yen. It declined to 58.09 euro cents from 59.79 cents yesterday, and dropped to 50.46 pence from 50.51 previously.

As financial markets continue to be unstable, a demand for safe haven assets has surged overnight with gold reaching a fresh high of US $1,712.39 an ounce.