NZ dollar sinks after shocking US manufacturing, retail data

The kiwi was trading at 59.55 US cents at 5pm. Photo / 123RF

The New Zealand dollar sank after shockingly bad US retail sales and manufacturing data made fear the dominant sentiment driving major equities markets amid the ongoing coronavirus crisis.

The kiwi was trading at 59.55 US cents at 5pm in Wellington from 60.66 cents at the same time yesterday. The trade-weighted index was at 67.90 from 68.58.

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The US manufacturing data showed output posted the largest drop since 1946, plummeting 6.3 per cent, while US retail sales slumped 8.7 per cent last month, the worst fall on record.

"It was pretty bad, and that's only a taste of what's to come," said Pat Gilligan, a director at Forex.

"Half the joint was still open for half of March – April will be terrible. I think we're only just scratching the surface with that data," Gilligan said.

While the New Zealand bourse was higher again today, the major Australian indices were in the red after the S&P 500 Index, the broad measure of US shares, sank 2.2 per cent in its last session while some of the European indices were even worse – the FTSE 100 was down 3.3 per cent.

"It was another wave of risk aversion," Gilligan said, adding that he was surprised the recent bout of optimism had lasted so long.

"The risk is for the kiwi and the Aussie to come off from here. Whether we test previous lows is yet to be seen."

The kiwi sank as low as 54.79 US cents about a month ago.

New local Covid-19 infections continue to sink, at 15 today from 20 yesterday. Deaths remain at nine and the nation is focused on the lockdown being eased from level 4 to level 3.

The government has promised to decide next Monday whether that will happen but Prime Minister Jacinda Ardern outlined today what level 3 would look like.

A number of businesses, including construction and forestry firms, will be able to resume work, and, while cafes and restaurants will remain closed, take-out deliveries and drive-through restaurants will be allowed to operate.

But overseas, especially in the US, the new infection rate remains strong and the death toll keeps rising. Testing capacity in the US remains a problem with supplies still inadequate to conduct enough tests to provide a reliable picture of Covid-19's spread.

The New Zealand dollar was trading at 94.83 Australian cents from 94.69 cents at 5pm yesterday. It was at 47.72 British pence from 48.11, at 54.73 euro cents from 55.27, at 64.29 yen from 64.95 and at 4.2174 Chinese yuan from 4.2791.

The bid price on the two-year swap rate closed at 0.3725 per cent from 0.4000 yesterday, while 10-year swaps were at 0.8925 per cent from 0.9550.