NZ dollar weakens as global risk aversion picks up

The US Treasury yield curve inverted on Wednesday for the first time since June 2007.

The New Zealand dollar fell as global risk aversion picked up again after US Treasury yield curve inverted briefly overnight, often viewed as a sign of looming recession.

The kiwi was trading at 64.35 US cents at 5pm in Wellington from 64.58 at 5pm. The trade-weighted index was at 71.61 points from 71.72.

"The key driver of all of this risk-off sentiment was yield curve inversion," said Kiwibank trader Mike Shirley.

The US Treasury yield curve inverted on Wednesday for the first time since June 2007, with yields on US 2-year notes rising above those on the 10-year note.

According to Refinitiv data it inverted as as much as minus 2.1 basis points but closed up 3.4 percent.

"This was the first time the 2-year dipped below the 10-year since 2007 – and in the past has indicated a looming US recession," said FX/rates analyst Sandeep Parekh.

"While some take comfort in the fact that this time around the signal from the curve may be distorted by global quantitative easing, the self-fulfilling nature of economic cycles is a worry," he said.

Today, markets will be watching for a speech by Reserve Bank of Australian deputy governor Guy Debelle on "Risks to the Outlook" at the annual Risk Australia conference in Sydney.

Australian labour market data will also be watched for any clues on whether recent rate cuts by the RBA are having an impact.

The New Zealand dollar was trading at 95.33 Australian cents from 95.05, at 53.35 British pence from 53.56, at 57.76 euro cents from 57.79, at 68.19 yen from 68.81 and at 4.5175 Chinese yuan from 4.5310.