NEWS / Foreign Exchange

USD recovers from all time lows

New Zealand dollar

Weak equities hurt carry currencies. The NZD suffered over the long weekend and was driven lower as soft equities and a lack of risk appetite hurt high yielding currencies. This latest round of risk aversion pushed the NZD down to a one-month low although a late recovery meant the NZD took back some of its losses from earlier in the day. NZD/USD opened circa 0.7480 yesterday and traded lower for much of the day and although there was plenty of two-way price action, the one-month low traded at 0.7367. We open this morning at 0.7435.

Australian dollar

Weak equities weigh on AUD. From the open the AUD faced renewed downward pressure as a slide in global stock markets saw investors unwind positions in higher yielding currencies. This saw AUD/JPY slide to the low 100.00 region at one stage, down some 6% from a week ago. AUD/USD meanwhile drifted down to 0.8840 before stabilising ahead of Australian PPI data. The data printed stronger than expected but had little effect. The afternoon saw equity markets around the region recoup losses, which provided the impetus for a recovery in the carry trade. AUD/USD pushed back towards 0.8900 as a result. Overnight AUD took another dive as risk aversion and a commodity sell off weighed on the currency pair. This saw AUD post close to a 1 month low of 0.8752. It opens higher this morning.

Major currencies

USD recovers from all time lows. The USD has fallen sharply since last Friday, with the bulk of the move occurring on Friday on continued equity market weakness. The move was prompted by further concerns about dodgy credit, with investors also nervous given the 20th anniversary of the share market crash. This eventually saw the USD take out record lows on an index basis, with particular weakness noted against the JPY which saw further unwinding of carry trades. It was a different story overnight as the USD recovered as investors covered short positions on the view that last week??™s currency may have been overdone.

Economic data and events

No data of note overnight. Fed Governor Kroszner discussed recent credit market turmoil and the regulatory response but gave no clues about the up-coming Oct 31 FOMC meeting.