NZ dlr off lows, risk worry dominates; debt firm
Reuters - 2 hours 43 minutes ago
WELLINGTON, Nov 12 - The New Zealand dollar <NZD=> held above two-week lows on Wednesday, but remained under pressure amid little appetite among investors for risky assets such as high-yielding currencies.
The currency had hit its lowest point since Oct. 29 in the offshore session but trimmed its losses as regional stock markets came off lows, although concerns about global recession remained paramount.
"While uncertainty about the global outlook persists, expect the NZ dollar to continue trading choppily taking its cues from global equities," said BNZ currency strategist Danica Hampton.
At 0400 GMT the kiwi was at $0.5759/62 compared with $0.5884/94 in late local trade on Tuesday.
Worries about a deteriorating global economy had seen the kiwi fall below $0.5700 overnight, the fall exacerbated by markets dampened by a U.S. holiday.
The Reserve Bank of New Zealand's six-monthly financial stability report passed uneventfully, as the central bank said it expected more financial turmoil before markets start to normalise.
"While we are far from seeing the final impact of the financial and economic disruption, New Zealand's banks, and the Australian parents of the majors, are well positioned to withstand the economic downturn," said RBNZ Governor Alan Bollard.
The RBNZ said it had already taken steps to help markets by supporting liquidity and would do more if necessary, but there were signs of a tentative return to more normal conditions.
"The key message of the day was that the New Zealand financial system appears fit and well prepared to weather the storm," said ASB Bank economist Jane Turner.
The RBNZ held its first term auction facility and accepted NZ$500 million for short term paper varying from 83 to 364 days.
A tender of short term bills, aimed at taking cash out of the system to keep the cash settlement level in balance, drew no takers for NZ$700 million worth of 83 day bills.
Third quarter retail sales are due on Thursday with expectations that sales volumes, which strip out price movements, will have fallen around 1.3 percent on the previous quarter.
New Zealand bonds rallied for a second session as shares fell, prompting demand for safe-haven debt.
The yield on the benchmark 10-year bond <NZ10YT=RR>, which moves inversely to prices, closed 4 basis points lower at 5.89 percent.
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