New Zealand Dollar Weaker, Tracks Lower Gold Price

The New Zealand dollar traded lower in late trading on Monday, tracking a drop in hard commodities, particularly gold.

The New Zealand dollar has certainly been under pressure, selling on the back of gold selling in early Asian trading, according to ANZ Foreign Exchange Manager Murray Hindley. Gold prices tracked the risk-off sentiment in wider markets, ANZ analysts related in a note. Chinese data over the weekend showed bank-lending growth was weaker than expected in September and has likely prompted this morning’s negative price action, per the analysis at ANZ.

Risk appetite was also downplayed in markets, front running the Chinese quarterly growth figures, which are due for release later in this week. Also on the radar for market-watchers is the European leaders’ summit.

BNZ FX Strategist Mike Jones told the Wall Street Journal that the Chinese data will be key to market direction, especially since Chinese data over the past month or so has failed to show any significant response to recent policy stimulus.

Jones said investors are hopeful this week’s September data will provide some evidence of a bottoming in activity. Further weakness, however, could prove to be the catalyst for a sustained break of the US$0.8145 support level for the New Zealand Kiwi, he said.

The spot price of gold fell to a 4-1/2 week low at $1,735.24 per troy ounce before retracing a bit in early morning in London trading. Before the opening of trading in the U.S. the price of gold was down 0.6 percent lower than the close on Friday. U.S. gold lost 0.8 percent to $1,745.80 per troy ounce in the same timeframe, losing even more ground by 11 am Eastern time. Technical analysis from Reuters show that the spot price of gold could extend losses to a support level at $1,717 per troy ounce, a key support level that could be tested in this week’s trading, as it has broken through support at $1,747 per troy ounce.

Currencies, including the New Zealand dollar, have largely influenced the gold market with major players including the U.S. dollar and euro currency pair. The relative flatness in the euro currently imposed by a standoff between the European Union and the sovereign nation of Spain, which must formally request a bailout, has brought a considerable lag to the gold market. The confusion over Spain and lack a of clarity on whether the European country will formally request a bailout has been significant enough to contribute to a failure of the rally in gold following the announcement of additional monetary stimulus from the Federal Reserve.

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