The New Zealand dollar slumped to its lowest level in six years as equities sank amid concerns about global growth.
The kiwi touched 62.44 US cents overnight, its lowest level since July 2009, amid low liquidity, and was trading at 64.90 cents at 8am in Wellington, from 65.89 cents at 5pm yesterday. The trade-weighted index fell to 69.98 from 71.04 yesterday.
Investors sold the kiwi as concerns about a slowdown in China spurred a flight to safe haven assets. China’s benchmark Shanghai Composite Index tanked 8.5 percent following weak manufacturing data on Friday, and concern about growth in the world’s second-largest economy spread to other markets, causing a selloff in European and US equities and pushing down the price of oil and other commodities. A gauge of investors’ concerns, the CBOE Volatility Index or VIX, climbed 24.8 percent to 34.97 after earlier rising as high as 53.29.
“Kiwi returned to its normal correlation with fear and that is to sell off and unfortunately just found a complete lack of buying interest in the point of maximum fear,” said ANZ Bank New Zealand senior FX strategist Sam Tuck. “What we have is a flash crash in currency markets, driven by a ripple of fear across markets. Kiwi remains clearly under pressure in that environment. The definitive certainty is volatility.”
ANZ expects the kiwi to trade between 63.80 US cents and 66.80 cents today.
In New Zealand today, the Reserve Bank is scheduled to release its quarterly survey of inflation expectations at 3pm.
The kiwi touched a five-week low of 87.72 Australian cents overnight, and was trading at 90.49 cents at 8am from 91.15 cents yesterday.
The local currency fell to 76.92 yen from 79.80 yen, dropped to 55.96 euro cents from 57.52 cents, declined to 41.13 British pence from 42 pence, and slipped to 4.1555 yuan from 4.2143 yuan.