NZ dollar rebounds; greenback falls on California lockdown

The kiwi was trading at 57.51 US cents at 5pm. Photo / 123RF

The New Zealand dollar rebounded after the greenback was hammered in the wake of the entire state of California going into full lockdown to try to slow the spread of the coronavirus.

The kiwi was trading at 57.51 US cents at 5pm in Wellington from 55.36 cents at the same time yesterday. The trade-weighted index rose to 66.90 points from 65.01.

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The market wasn't quite as volatile today, with the kiwi trading a 3 US cent range rather than the 5 cent range seen the day before. It bounced off the 56.08 cent low around midday but also retreated from the day's high of 59.14 cents reached in the immediate wake of the California announcement mid-afternoon.

Just a week ago, the New Zealand bird closed at 60.57 cents in New York.

"The US dollar got sold because California has gone into hardcore lockdown," said Imre Speizer, currency strategist at Westpac. "It's just a by-product of that."

California's governor Gavin Newsom said the state-wide stay-at-home order starting Thursday evening his time, which affects about 40 million people, will remain in place until further notice.

His announcement came just after a similar order covering Los Angeles County. The city of San Francisco and surrounding areas had been on lockdown since Tuesday.

The order covering the world's fifth largest economy – California's is twice as big as Italy's – means residents have to stay in their homes, leaving only for exercise and for essential needs. All non-essential businesses have to close.

Some restaurants will remain open for delivery or take-out only while grocery stores, pharmacies and banks will also remain open.

"This is a moment we need to make tough decisions," Newsom said. "We need to recognize reality," Newson was reported as saying.

Westpac's Speizer predicted more volatility to come because the S&P 500 Index futures were down about 1.6 per cent.

"I think equities will get clobbered. We will see more risk-off tonight," he said.

The number of people known to be infected in the US has more than doubled from 5,700 on Tuesday to 14,322. Deaths there now total 218.

Worldwide, the number of cases is now 245,660 with 10,050 deaths.

In New Zealand, where the border closed last night to all but citizens and residents, the number of those infected jumped to 39 from 28 yesterday. The Ministry of Health is investigating whether the 11 new cases were travellers, or relatives of travellers, as all of the previous 28 cases have been.

The New Zealand dollar was trading at 98.04 Australian cents at 5pm from 99.50 cents late yesterday. It was at 49.48 British pence from 48.05, at 53.58 euro cents from 50.75, at 63.39 yen from 60.48 and at 4.0752 Chinese yuan from 3.9120.

The bid price on the two-year swap rate fell to 0.6450 per cent from 0.8050 yesterday while the 10-year swaps sank to 1.3500 per cent from 1.5700 per cent.