The New Zealand dollar struggled to regain footing against the greenback, despite the pullback in global equity markets that apparently signals a return of upbeat sentiment.
Headlines
Credit Crunch Forces New Zealand?s Banks to Hold Back Loans
Banks are hoarding cash and are reluctant to lend to each other because of the credit crunch in the United States, and the Reserve Bank might need to step in to restore liquidity, the Financial Markets Association says. The heads of financial markets from banks met Reserve Bank officials on Monday morning about the impact on New Zealand banks of the credit crunch in the US subprime mortgage market - the risky end of the home loan market.
http://www.stuff.co.nz/4174017a13.html
Source: Stuff.co.nz
Subprime Woes Drive Sixth Finance Company into Liquidation
The failure of VTL Group subsidiary Nathans Finance is likely to drive Chancery Finance, another company owned by VTL Group, into liquidation. And investors in Chancery have less chance of getting their money back than investors in Nathans. Chancery stopped issuing bonds last year but still had $17 million to $18 million outstanding.
Source: The New Zealand Herald
Air New Zealand Under Pressure as Virgin Blue Announces Plans to Compete
Air New Zealand Ltd. tumbled, bringing its two-day decline on the nation?s stock market to a record 15 percent, after Virgin Blue Holdings Ltd. said it will start a low-cost rival. Air New Zealand, the nation’s biggest airline, fell 14 cents, or 6.5 percent, to NZD 2 at the 5 p.m. market close in Wellington.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agIvmui2f6CE
Source: Bloomberg
Market Activity
Currency Market - NZD:
The New Zealand dollar struggled to regain footing against the greenback, despite gains in global equity markets that signal improved investor sentiment. The Kiwi has recovered some some of the losses accumulated on August 9, when French bank BNP Paribas blocked withdrawals from three investment funds. Risk of fluctuation in the exchange rate is still high, as volatility on NZD currency options is at 17 percent, above the average of 10.3 percent over the last 12 months. Kiwi performance against the currencies of five key trading partners was lackluster as suggested by the slide in the trade-weighted index to 67.12 at the end of the Wellington session from 67.57 yesterday.
[B]NZDUSD (Daily Chart)
[/B]Prepared by DailyFX Research Team
Source: Bloomberg
Equity Market - NZSX-50 Index:
New Zealand?s bourse edged up for the third consecutive session, as cautious optimism aided the Kiwi stock market to recoup 3 percent by the middle of the week. After double-digit gains during the past two sessions, the daily advance by benchmark NZSX-50 index slowed down to a modest 0.1 percent. The NZSX-50 index closed up 5.48 points to 4033.27 on total turnover of NZD 136 million.
[B]NZSX-50 Index (Daily Chart)
[/B]Prepared by DailyFX Research Team
Source: Bloomberg
Fixed-Income Market - 10-year Government Bond Yields:
An ease back in credit fears sparked signs of revival in global equities and diminished demand for safer investment alternatives. As a result, the yield on New Zealand?s 10-year government note gained 4 basis points to 6.215 percent.
[B]10-year Government Bond Yields (Daily Chart)
[/B]Prepared by DailyFX Research Team
Source: Bloomberg