KEY POINTS:
There was good news for exporters on the foreign exchange market today as the New Zealand dollar took another big step down, particular against the yen.
On its key cross rate against the US dollar, the kiwi dollar fell to US68.32c by 5pm from US69.28c at the same time on Friday and it was well down on the level above US71c last Tuesday.
Against the yen, it fell to 79.04 at 5pm from 81.51 at 5pm on Friday, breaking below the key level of 80.00 today.
"It is just more of the same. The carry trades on the kiwi/yen cross that pushed the kiwi dollar higher are continuing to be unwound," one dealer said.
Investors around the world have been borrowing money in low interest rate countries like Japan and investing the money in high interest rate currencies like the New Zealand dollar in so called carry trades.
But lately a fall in equity markets globally has spooked investors making speculative plays in the currency market and the carry trades have been unwound, pushing the yen up.
By the end of last week the yen had risen to an 11-week high against the US dollar, wrapping up its best week in 14 months as investors unwound carry trades.
The high New Zealand dollar has hurt exporters because they receive less when they convert earnings in foreign currencies back to New Zealand dollars.
A dealer said the trend to unwind carry trades could change if the Reserve Bank of New Zealand raises interest rates again at a rate review on Thursday.
The market pricing in 80 per cent chance of a rate rise and 15 out of 16 economists in a Reuters poll forecast a rise.
Analysts said that after the battering high-yielding currencies took last week, investors would be reluctant to view the recent shakeout as a buying opportunity until a sense of calm had returned to the market.
The trade weighted index was at 67.35 from 68.26.
The ANZ bank today said the risk aversion theme from last week would likely spill over into this week.
The market had taken the view that the risk of a recession in the US economy had increased, even though from an economic viewpoint nothing fundamentally had changed, ANZ said.
Rates:
5pm today 5pm Friday
NZ dlr/US dlr US68.32c US69.28c
NZ dlr/Aust dlr A87.85c A88.32c
NZ dlr/euro 0.5194 0.5260
NZ dlr/yen 79.04 81.51
NZ dlr/stg 35.37p 35.37p
NZ TWI 67.35 68.26
Australian dollar US77.71c US78.50c
Euro/US dollar 1.3149 1.3165
US dollar/yen 115.73 117.68
- NZPA