You are using an older browser version. Please use a supported version for the best MSN experience.

NZ dollar falls on US bank stocks fears

NZ NewswireNZ Newswire 29/09/2016 Paul McBeth

The New Zealand dollar followed stocks on Wall Street lower as several hedge funds scaled back their business with Deutsche Bank, triggering fears the US Department of Justice's $US14 billion claim against the financial institution could have wider implications for the sector.

The kiwi fell to 72.56 US cents at 8am in Wellington from 72.90 cents on Thursday. The trade-weighted index declined to 77.06 from 77.26.

The Dow Jones Industrial Average fell 1 per cent as financial stocks including Goldman Sachs declined after Bloomberg reported a number of funds that clear derivatives trades with Deutsche Bank withdrew some excess cash and positions held with the lender, a sign of counterparties' mounting concerns about doing business with Europe's largest investment bank.

The US justice department proposed settlement against Deutsche Bank over an investigation into residential mortgage-backed securities is almost as much as the bank's market value.

The Chicago Options Board Exchange's Volatility Index, known as Wall Street's fear gauge, spiked 17 per cent to 14.45, and risk-sensitive currencies such as the Australian, kiwi, and Canadian dollars fell.

"A risk-off tone developed when reports came through of some counterparties that deal with Deutsche Bank withdrawing some excess cash and positions held at the bank, a reflection of DB's perceived credit risk," BNZ's Jason Wong.

"This has seen commodity currencies lose some ground and support for safe-haven currencies."

Commodity-linked currencies got a boost on Thursday when oil prices rose on an announcement by OPEC that they would reduce production, but have since retraced those gains.

The kiwi increased to 94.96 Australian cents from 94.75 cents, fell to 4.8368 Chinese yuan from 4.8658 yuan, declined to 73.34 yen from 73.95 yen, dropped to 64.65 euro cents from 65 cents and was little changed at 55.92 British pence from 56.02 pence.

image beaconimage beaconimage beacon