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Risk aversion takes hold, is this the start of a correction lower?

Written by Sam Coxhead on April 12th, 2011.      0 comments

3:41 PM (NZT) In the session offshore overnight risk aversion took hold and this has spread into the Asian session as equity markets move lower and commodity prices weaken. Oil is leading the trend, moving around 1% lower. Expectedly, with this change in sentiment the AUD has been under a little pressure on all cross rates, giving up the most to the “safe haven” currencies of the YEN and Swiss Franc. It has the feel that we may have seen the highs in the risk assets on the recent move, and further correction lies ahead. The NZD has been under similar pressure , but not to the same extent.
Interestingly comments made by RBNZ head Dr Bollard have pushed NZ interest rates slightly higher on the day. He commented that the continuation of the high commodity prices would ensure that the level of the NZD remained high. If Households and businesses use the income from higher commodity prices to bring forward investment and consumption of cheaper imported goods, then pressure on resources in NZ would lead to more inflationary pressure.
Adding to the risk aversion is the progression of the Japanese nuclear disaster at Fukushima. The rating of this melt down has been increased to that of Chernobyl at a rating of 7.
Economic data on the radar tonight includes the UK inflation numbers and German economic sentiment statistics.
    Last 24 hours trade
  Current level Low High
NZD/USD 0.7761 0.7766 0.7847
AUD/USD 1.0413 1.0410 1.0573
NZD/AUD 0.7455 0.7407 0.7477
AUD/NZD 1.3414 1.3373 1.3499
NZD/GBP 0.4763 0.4761 0.4806
NZD/EUR 0.5393 0.5393 0.5430
NZD/JPY 64.92 64.86 66.28
NZD/CAD 0.7466 0.7448 0.7503