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Australian dollar hardest hit as risk aversion grips market

Written by Andrew Isbister on March 16th, 2011.      0 comments

9:00 AM (NZT) Global equity indices have been smashed in the last 24 hours as risk aversion grips the markets. With the extent of the Japanese nuclear situation appearing far from understood at this point, investor have hit the sell button across a broad range of asset class.
In the currency markets the Australian dollar has been the hardest hit. With Australia’s exposure to the Japanese markets obviously huge, the Australian economy will be significantly impacted. Also, as we have always said, the Australian dollar will get hammered the most if the world looks risky, as when the world looks rosy and growth is predicted, the Australian dollar has generally been the biggest beneficiary, in recent years.
No doubt if the situation in Japan stabilises, and if the worst fears of the markets are not realised, equity and the currency markets will bounce back strongly. However until that does happen, expect “risk currencies” to remain under pressure.  
Whilst the New Zealand dollar has also suffered on risk aversion selling, it has strengthened against the Australian dollar, as the implications for the New Zealand economy, whilst significant, are seen as less.
Current interbank currency levels are as follows:
NZDUSD               .7325
AUDUSD              .9911
NZDAUD              .7398
AUDNZD              1.3516
NZDGBP               .4555
NZDEUR               .5234
NZDJPY                .5916
NZDCAD               .7209