by Jon Beddell
Foreign Currency Market Update – Sterling / New Zealand Dollar
Sterling had already lost two cents last week, and promptly lost another four cents when things got nasty yesterday, the largest one day fall since August 2009 . Not a good start to the week! A weekend poll showing a high probability of a hung parliament set the scene for a wobbly week, but it was no one factor that triggered the big slide. Another contributor was Prudential’s announcement that it will purchase AIG’s Asian life insurance business. That will require the sale of a large amount of sterling to fund the $35bn price tag, most of which is to be paid in cash. Markets were also spooked by news items concerning Iran’s failure to cooperate with nuclear watchdogs the IAEA. Sentiment toward the pound has been deteriorating sharply in recent weeks, and any one of these news items were excuse enough to cause a stampede for the exit. An apparent improvement in manufacturing activity was completely ignored, and mixed mortgage data did nothing to contribute. The prospect of low UK interest rates remaining static for a long period further differentiated the high yielding currencies, helping the Aussie dollar and it’s Kiwi cousin make hay from sterling’s weakness.
The sterling/kiwi rate is now testing record lows at 2.13. A break below here could trigger significant further downside, just as it has for the Aussie dollar. Buyers of the New Zealand dollar should cover at least half of any exposure now to reduce risk.
Related posts:
- Foreign Exchange Aussie Dollar Update – Sterling Plunges on Election Worries
- Foreign Exchange US Dollar Update – Sterling Plunges on Election Worries
- Foreign Exchange Euro Update – Sterling Plunges on Election Worries
- Foreign Exchange Rand Update – Sterling Plunges on Election Worries
- Foreign Exchange Yen Update – Sterling Plunges on Election Worries
