Dollar steady despite massive drop in share markets

The New Zealand dollar was largely unchanged against the US dollar, holding its ground despite Asian share markets tumbling after Wall Street took an overnight nosedive as investors fretted about rising US yields.

The kiwi traded at 64.75 US cents at 5pm in Wellington from 64.62 US cents at 8am and 64.84 US cents late yesterday. The trade-weighted index was at 70.95 from 70.98 late yesterday.

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The Standard & Poor’s 500 ended Wednesday with a loss of 3.29 per cent, the Nasdaq Composite shed 4.08 per cent and the Dow Jones Industrial Average fell 3.2 per cent. New Zealand’s S&P/NZX 50 index was down 3.6 per cent at 5pm, tracking a sea of red in Asia.

The New Zealand dollar has been “remarkably resilient given how much stock markets fell overnight and today,” said Imre Speizer, Westpac Banking Corp’s head of NZ strategy.

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The kiwi held up partly because the market has now fully priced the Federal Reserve’s tightening cycle and also because the kiwi’s recent sharp fall means it is trading below fair value at around 68 US cents.

Comments from US President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates, also helped keep a lid on the greenback. “I really disagree with what the Fed is doing,” Trump told reporters. “I think the Fed has gone crazy.”

Speizer said any hint of possible government pressure on the Federal Reserve will make markets nervous. The yield on US 10-year Tressuries also pulled back to 3.15 per cent after touching a high of 3.26 per cent earlier this week.

The focus now will be on US September consumer price index figures due later today. A higher-than-expected

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