NZ dollar dips as investors fly to safety

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The New Zealand dollar fell below 65 US cents as investors spooked by terrorism attacks in Paris favour so-called safe haven assets.

The kiwi touched a six-week low of 64.66 US cents, and was trading at 64.92 cents at 8am in Wellington, from 65.27 cents at 5pm yesterday. The trade-weighted index dropped to 70.99 from 71.27 yesterday.

Investors are seeking the safety of the greenback and the yen and eschewing commodity-linked currencies such as the kiwi following Friday's terrorist attacks in Paris. The local currency already faced downward pressure amid expectations the Reserve Bank will probably cut interest rates further next month, in contrast with the Federal Reserve in the US which is expected to hike rates.

"The New Zealand dollar is caught by a 'risk off' kind of attitude," said Derek Rankin, director at Rankin Treasury Advisory. "People basically feel a little bit more worried, they want to go more for safety and New Zealand gets sold in that situation. I think it is just a temporary thing. It will just take a couple of days to pass through."

Tonight's GlobalDairyTrade auction, where NZX milk futures are predicting a decline, is likely also weighing on the kiwi, Rankin said. Dairy products are New Zealand's largest commodity export.

Rankin said the kiwi had been trading in a range between 64.50 US cents and 66 cents the past few weeks. Currencies were likely to continue to drift in November leading into central bank meetings in December where changes in interest rates were likely, he said.
In New Zealand today, the Reserve Bank publishes its quarterly survey of inflation expectations at 3pm.

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The New Zealand dollar slipped to 91.42 Australian cents from 91.71 cents yesterday, ahead of the release today of the Reserve Bank of Australia's minutes to its last meeting. RBA assistant governor (economic) Christopher Kent will deliver opening remarks to UBS's Australasia conference in Sydney.

The local currency edged up to 79.99 yen from 79.90 yen after a report showed Japan had its second consecutive negative quarter of growth, tipping it into recession. That countered safe-haven demand for the yen.

The kiwi edged lower to 60.75 euro cents from 60.85 cents, dropped to 42.68 British pence from 42.90 pence, and fell to 4.1354 yuan from 4.1623 yuan.