WSJ: NZ Dollar Down Late On Economic Concerns, Reversing Earlier Gains
WELLINGTON (Dow Jones)--The New Zealand dollar was trading lower late Monday after global concerns over the pace of economic recovery undermined gains made earlier in the session.
The Kiwi pressed up to a high of US$0.7047, due largely to sentiment in Asia, particularly Tokyo, that the New Zealand and Australian dollars had been oversold in the previous New York session, said BNZ currency strategist Mike Jones.
"Most of that has since been unwound" due to concerns over the global economic recovery, he added.
Jones said US$0.6970, December's low, was the key support level to watch because if it was breached it could indicate a deeper correction, while initial resistance is at US$0.7090.
Several European manufacturing indices are due out later Monday, which if positive could bolster the Kiwi as manufacturing has been one of the key areas in driving growth globally, Jones said.
"If those PMI indices are strong then they may act as a reminder that global growth for this year is not all that bad and we may see commodity currencies push higher," Jones added.
However, much of the focus remains on interest-rate decisions due out from the Bank of England, the European Central Bank and the Reserve Bank of Australia later in the week and economic data from the U.S., particularly nonfarm payroll data, he said.
ANZ economists said in a report that the direction of the Kiwi is still very much dictated by global events, with regulatory threats and the central bank's exit strategies the main concerns.
"On the face of it, the track of monetary policy in NZ now looks more like a continuously lit eight-lane highway compared with a dusty shingle goat track we were negotiating last year."
They added this was positive until a "data pothole surfaces."
Government bonds pushed slightly higher while swap rates pushed up largely following global markets, a local bond trader said.
The trader also said the market is waiting to see whether the Reserve Bank of Australia will raise interest rates Tuesday but added: "We are also chartering our own path."
