NZ dollar falls

australian-and-new-zealand-dollarThe New Zealand dollar dipped against the greenback on Wednesday as rising yields on US government bonds stoked demand for the world’s reserve currency.

This came after traders were spooked by the Bank of Japan trimming its bond purchases on Tuesday.

The kiwi decreased to US71.69c as at 0900 in Wellington from 71.79c Tuesday. The trade-weighted index edged up to 74.79 from 74.64.

The yield on US 10-year Treasuries rose almost 6 basis points to 2.54 per cent, the highest since March last year, as investors cooled on bonds as an upcoming glut of supply coincided with the Bank of Japan surprising markets by reducing its purchases of long-dated Japanese bonds.

Billionaire fund manager Bill Gross of Janus Henderson Group said on Twitter that the rise in yield confirmed a bear market for bonds, saying 25-year long-term trendlines had broken in the five- and 10-year notes.

“How high yields go is still a highly polarising question. But if real yields start to rise convincingly too, we’d be keeping a close eye on broader asset valuations as their lofty levels may start to be questioned,” ANZ Bank New Zealand senior economist Phil Borkin said in a note.

“The impetus for a push higher (in the kiwi) may again not be there today, particularly following the surge in US yields, but we still feel that is the main risk in the near-term.”

The local currency declined to 80.77 yen from 80.85 yen Tuesday after the Bank of Japan’s surprise move stoked demand for Japan’s currency.

The kiwi rose to A91.65c from 91.31c and advanced to 4.6794 Chinese yuan from 4.6161 yuan. It traded at 60.10 euro cents from 59.96 cents and increased to 53 British pence from 52.87 pence Tuesday.

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