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Tensions see kiwi at five-month low vs yen

NZ Newswire logoNZ Newswire 12/04/2017 Jonathan Underhill

The New Zealand dollar fell to a five-month low against the yen on Wednesday as geopolitical tensions sapped investors' risk appetite, driving more investors to Japan's currency.

The kiwi dollar fell to 76.04 yen as at 5pm in Wellington, and earlier touched 75.86 yen, the lowest since November 14, from 76.91 yen late on Tuesday.

The kiwi slipped to US69.45c from 65.54c and the trade-weighted index fell to 75.77 from 75.94.

Reuters reported that Chinese President Xi Jinping discussed the situation in North Korea with US President Donald Trump and Chinese state media reported Mr Xi saying a resolution of tensions should be achieved by peaceful means.

However, a separate report said Japan's navy plans to join a US navy strike group in a joint show of force off the Korean peninsula in an effort to deter the secretive state from conducting more missile tests.

"There's certainly plenty of chest pumping going on. Yen crosses are stronger across the board. There's a little bit of risk off," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

The yen is a funding tool for carry trades and some of those have been unwound, he said.

A carry trade is where an investor uses funds borrowed in a country with low interest rates such as Japan to invest where interest rates offer a better return, such as New Zealand.

"Gold and the Japanese Yen have strengthened as mounting geopolitical tensions continue to weigh on markets," said dealers at HiFX, in a note.

Spot gold, which along with the yen is perceived as a haven asset in times of reduced risk appetite, climbed to US$1,279.80 an ounce.

The kiwi fell to 55.62 British pence from 55.96 pence late Tuesday. It was trading at A92.66c from 92.69c. It declined to 65.47 euro cents from 65.64 cents and fell to 4.7893 Chinese yuan from 4.7992 yuan.

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