Heading towards the end of the trading week, the story remains much of the same for New Zealand. The NZ dollar sank as much as five US cents over the past 24 hours as panic selling and a flock to USD took place with futures market pointing to yet another sell-off on Wall Street. Against the British pound, NZD fell from 49.19 to 48.05. Investors continue to fret at the domestic currency now sits at levels unseen since the depths of the global financial crisis in the first half of 2009. In terms of the coronavirus, New Zealand’s figure now sits at 28, with all of them being travellers or relatives of travellers. No signs of community infection have surfaced as of yet, but the impact from the disease has still rocked the NZ dollar to worrying lows. In an attempt to combat the spread of the disease, the NZ government noted that all travellers must self-quarantine two weeks after arrival and have today banned all indoor gatherings of more than 100 people.
NZD Sinks Amid Panic Sell-Off
The mass sell-off of the New Zealand dollar continued earlier today in the Asian trading session, with NZD sinking by 5 US cents and dropping against the British pound. The RBNZ’s interest rate now stands at 0.25% from 0.5%, in line with that of the RBA. A rescue package announced by the Reserve Bank of Australia at 4.30pm NZ time barely lifted the Aussie off its lows – it traded a similar five US cent range – and the kiwi along with it.
Concerning the NZ dollar, the market has noted that it is moving away from some of the dynamics which may have been previously discussed in supporting the Kiwi, like relative interest rates and the terms of trade. Foreign investors are also now demanding greater compensation for holding NZ government bonds. The yield on the April 2029 bond rose by more than 30 basis points to 1.77% today, for example.
NZ Governments Rescue Package Requires Input From Bond Sales and Treasury Bills
The government’s $12.1 billion economic rescue package, which amounts to about 4% of GDP, will require a $3b increase in bond sales and $1b of Treasury bills. New Zealand has always had reliance on global funding, particularly in times of stress, meaning those who provide funding to New Zealand will demand greater reward for that and a lower currency is one way of doing that. Offshore investors owned almost 54% of New Zealand government bonds at the end of February, according to Reserve Bank data.
Meanwhile the NZ government attempts to keep their coronavirus numbers low as they today banned all indoor meetings of 100 or more people. This follows the already in place two-weeks self-quarantine for new travellers to the country. The number of known infected in New Zealand currently sits at 28.
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