NZ dollar falls to six-month low on Japan, Middle East fears

Photo / Dean Purcell

The New Zealand dollar fell to a six-month low against the greenback as the nuclear crisis in the Japan and continued political unrest in the Middle East saw investors shun so-called risk sensitive currencies.

The kiwi dollar tumbled to a near two-year low against the yen yesterday as the much-speculated liquation of overseas holdings by Japanese investors began to take effect. Traders are now debating whether it was a full repatriation or if there are still fund flows to come.

Risk sentiment was further dented by escalating conflict in Libya and Bahrain, which saw the price of Brent Crude rise to US$114.99 a barrel from US$112 yesterday.

Commodity prices gained in the session after coming under pressure earlier this week, with the Thompson Reuters CRB Index, a broad measure of 19 commodities, gaining 1.9 per cent to 348.67.

"Even though we saw commodity prices recover, commodity currencies lagged behind, which is a sign investors remain quite nervous," said Khoon Goh, head of market economics & strategy at ANZ New Zealand. "With the oil price rising markets are shifting their focus, but the Japanese situation will still dominate."

The kiwi fell to 71.79 US cents from 72.17 cents yesterday, and fell to 63.33 on the trade-weighted index of major trading partners' currencies from 63.79.

It dropped rose to 73.20 Australian cents from 73.57 cents yesterday, and fell to 56.76 yen from 57.29 yen. It dropped to 51.23 euro cents from 51.86 cents yesterday, and sank to 44.51 pence from 45.03 pence.

Production at US factories increased for a sixth month in February, according to the latest US Federal Reserve manufacturing survey, adding evidence that the world's largest economy is in recovery mode. The 0.4 per cent rise in output, which makes up 75 per cent of all industrial production, followed a 0.9 per cent gain in January.

Goh said he expects the currency to trade in a range of between 71.60 US cents and 72.35, with major support around the 71.08 cent level.