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Risk off continues in overnight action

Written by Sam Coxhead on May 5th, 2011.      0 comments

8:05 AM (NZT) The inklings from yesterday that the “risk off” bias was starting to hit the market have proven correct. Commodities and equities are lower across the globe and the NZD and AUD have been the currencies most heavily sold as one would expect in this type of price action. The silver market continues its clean out and is now down a massive 20% on the week. It remains to be seen if this trend will continue as we approach some substantial support levels in a number of different markets. With so much data due this week culminating in Fridays all important US employment numbers, it may play out that we see further selling of risk assets. Across the board weaker economic data has helped the slide. UK housing and construction, Euro-zone retail sales and services, and US services and private employment numbers have all been lower overnight.
This morning we have the notoriously volatile 1st quarter employment numbers due out in New Zealand. Expectations are for an employment gain of .5% and an unemployment rate of 6.7%. These numbers will be keenly watched and no doubt see some reaction if too far away from expectations. Later on today the Australian Retail Sales and Building Consents numbers are due for release, better than expected numbers will add fuel to the fire of a RBA hike and may help slow the slide of the AUD.
The JPY has been a main beneficiary of the move away from risk assets, and worth noting are rumours that the Bank of Japan will again intervene to curb YEN strength should the USD/JPY rate dip below 80.00, the current is level of 80.55.
The EUR has held up remarkably well in offshore trade, buoyed by higher long term German interest rates and dipping yield on peripheral state bond prices. It would appear that debt fears are subsiding for the time being.
The GBP also has performed well in the face of weak economic data , no doubt given support by the credit ratings agency S&P comments that the Bank of England would be hiking the cash rate within three months.
    Last 24 hours trade
  Current level Low High
NZD/USD 0.7903 0.7866 0.7995
AUD/USD 1.0739 1.0738 1.0880
NZD/AUD 0.7362 0.7302 0.7360
AUD/NZD 1.3583 1.3586 1.3695
NZD/GBP 0.4789 0.4764 0.4842
NZD/EUR 0.5328 0.5298 0.5386
NZD/JPY 63.66 63.41 64.78
NZD/CAD 0.7573 0.7540 0.7613