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What happened in offshore markets? Big movement as fear again gripped investors.

Written by Sam Coxhead on August 19th, 2011.      0 comments

9:00 AM (NZT) Fear took over the market again today after an absence for the bulk of the week. Again it was the two pronged attack on sentiment by increases European debt fears impacting on the wider credit markets. And awful economic numbers again in the US, this time in the form of the Philadelphia Fed Manufacturing Index implosion.
The fear started late yesterday afternoon as the USD started to rally on the back of a Wall Street Journal article saying that the New York Federal Reserve was actively investigating the funding situations of the US arms of European banks. Wholesale funding rates have been increasing  over the last few week and the intimation is that the US arms of the European banks maybe being used to supply funds to their European parents in a way that leaves the US banking sector more vulnerable than  US authorities are comfortable with. This escalated into heavy selling of German banking stocks, mainly because of the temporary short selling restrictions elsewhere, and spread on to the wider market sentiment.
As if the threat of credit markets freezing up was not enough, some of the data out of the US was simply awful. The main offender was the Philadelphia Fed Manufacturing Index, which is widely seen as  a barometer of manufacturing in the US. The index was expected to rise slightly from 3.2 to 4 , but came out at an astonishingly weak -30.7 which is back down around levels not seen since the midst of 2009, and again brings up the prospect of re-entry into negative growth in the US.
The NZD and AUD have been punished accordingly across the board as growth currencies, with the NZD under the most pressure.
Equities closed around 4% lower in the US, after being off by more than 5% at one stage, oil dropped around 7% and gold unsurprisingly in demand and looks comfortable above USD 1800 per ounce. The benchmark US 10 yr Treasury Note was in hot demand and at one stage dipped below 2% before bouncing.
    Last 24 hours trade
  Current level Low High
NZD/USD 0.8215 0.8381 0.8191
AUD/USD 1.0391 1.0351 1.0558
NZD/AUD 0.7905 0.7883 0.7975
AUD/NZD 1.2650 1.2539 1.2686
NZD/GBP 0.4974 0.4964 0.5062
NZD/EUR 0.5730 0.5719 0.5804
NZD/YEN 62.90 62.69 64.17
NZD/CAD 0.8133 0.8109 0.8227