Dollar Haven Hammers Kiwi to Five-Year Low as Greece Beats ChinaChikako Mogi
The U.S. dollar climbed with its allure as a haven burnished as Greece edged toward an exit from the euro, sapping demand for the Aussie and kiwi even after China’s central bank cut its benchmark lending rate to a record.
A gauge of the greenback against its major peers rose to a three-week high as New Zealand’s dollar touched a five-year nadir and Australia’s currency weakened. Demand for higher yielding assets fell as Greek leader Alexis Tsipras’s decision to call a referendum on aid conditions overshadowed a decision by the People’s Bank of China to cut rates for the fourth time since November. China is a key export market for New Zealand and Australia
“When the number one global currency -- the U.S. dollar -- rises, kiwi and Aussie fall,” said Yuji Saito, executive director of foreign exchange in Tokyo at Credit Agricole SA. “Assets to buy are the dollar, yen and Treasuries.”
The Bloomberg Dollar Spot Index, which tracks the performance of a basket of 10 leading global currencies against the U.S. dollar, gained 0.4 percent to 1,185.27 as of 6:58 a.m. in London. The dollar strengthened against all its 16 major peers except for the yen.
The New Zealand dollar slid 0.4 percent to 68.35 U.S. cents, and earlier touched 67.87, its weakest since June 2010. The Aussie declined 0.1 percent to 76.49 U.S. cents after dropping as much as 0.9 percent to a 2 1/2-month low of 75.87.
The greenback surged more than 1 percent versus the euro as Greece moved to avert the collapse of its financial system by shutting lenders and imposing capital controls as of Monday, a measure that will deepen the country’s recession. Haven flows also boosted the yen by 1.2 percent to a one-month high.
Bets that the Federal Reserve will start raising rates this year are also driving demand for the greenback.
“Now that the U.S. is getting out of monetary easing and Japan could add stimulus, it’s possible that the dollar will become the best safe haven,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo.
The U.S. dollar has been the strongest performer among 10 developed-nation currencies over the past year, gaining 19 percent, followed by a 13 percent advance in the Swiss franc, Bloomberg Correlation-Weighted Currency Indexes show.
Meanwhile, China’s rate cut Saturday underscores that the nation’s economy needs stimulus to stem a slump, said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. The nation is Australia’s largest trading partner and is New Zealand’s biggest customer for dairy exports.
“China still adds another degree of uncertainty,” he said. “It’s clearly slowing, China clearly sees the need to slow the slowdown. It adds another level of uncertainty to Aussie and kiwi.”