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Risk aversion slows, but interest rate yields remain lower for the most part

Written by Sam Coxhead on April 13th, 2011.      0 comments

3:40 PM (NZT) The markets have continued to trade in an interesting fashion in the last 24 hours. The UK inflation numbers came in at 4% year on year versus an expectation of 4.4%. This has caused some GBP weakness as the market has now all but discounted a chance of a hike in the cash rate from the Bank of England in May. Both JP Morgan and BNP Paribas have publically changed their call on hikes from May to August. This will once again lengthen the horizon for clients looking to make money transfers from the UK to New Zealand and Australia, as the prospect of any sharp appreciation of the GBP over the NZD and AUD has been lowered by this inflation number
The Bank of Canada left their cash rate unchanged at 1% as expected but surprised the market by not being as “hawkish” as expected. They sighted the high level of the CAD as curbing inflationary pressures somewhat. This has seen the CAD depreciate almost across the board and the lower equity and oil markets have not helped the CAD’s cause.
The EUR remains reasonably well supported as the Chinese have come out and stated that they will continue to buy Spanish debt. This continues the theme of overall diversification away from the USD. The difference between level in Spanish and German debt has contracted and is a positive sign for the debt contagion concerns in the short term.
Equity markets in Asia are tracking lower , but at less accelerated levels than yesterday. Globally interest rate markets have seen yields move lower due to the more dovish nature of events in the last 24 hours, aided by comments made by US Fed officials Yellen and Dudley.
The New Zealand dollar has been a good performer against the trend of lower risk assets. Those looking for currency transfers into NZD will have to be patient as yesterdays comments from RBNZ head Bollard have seen interest rates rise in NZ, which is NZD supportive.
    Last 24 hours trade
  Current level Low High
NZD/USD 0.7847 0.7825 0.7872
AUD/USD 1.0445 1.0390 1.0523
NZD/AUD 0.7517 0.7449 0.7526
AUD/NZD 1.3303 1.3287 1.3424
NZD/GBP 0.4828 0.4756 0.4839
NZD/EUR 0.5423 0.5404 0.5434
NZD/JPY 65.91 65.39 66.23
NZD/CAD 0.7557 0.7460 0.7588