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FOREX-Safe-haven currencies in favour, kiwi boosted by RBNZ
March 12, 2014 / 10:56 PM / 4 years ago

FOREX-Safe-haven currencies in favour, kiwi boosted by RBNZ

* Swiss franc & yen well bid as China worries fester

* NZ dollar rallies after RBNZ hikes rates and signals more to come

* China industrial production and retail sales data eyed

By Ian Chua

SYDNEY, March 13 (Reuters) - Safe-haven currencies the Swiss franc and yen were in favour early in Asia on Thursday, consolidating their overnight gains as worries about the health of the Chinese economy took a toll on risk appetite.

Data showing a surprisingly big tumble in China’s exports last month has spooked investors, who are now waiting for industrial production and retail sales figures for January and February, which are due around 0530 GMT.

Any disappointment in those numbers would heighten fears about a slowdown in the world’s second-biggest economy and keep investors wary of building their exposure to risk.

“We expect modest downside surprises, which are likely to keep sentiment toward China somewhat negative,” analysts at Barclays Capital wrote in a note to clients.

The dollar last stood at 0.8738 Swiss francs after falling as far as 0.8731 francs, a low not seen since October 2011. Against the yen, the greenback traded at 102.72, having earlier hit a one-week low of 102.55.

Lessening the appeal of the dollar was a drop in U.S. Treasury yields as a result of safety flows. The benchmark yield slid to a one-week low of 2.71 percent, pulling away from Friday’s peak of 2.82 percent.

The dollar also lost ground against the euro, which re-tested a 2-1/2 year peak of $1.3915 set last Friday. The common currency was last at $1.3904.

Traders said ECB Executive Board member Benoit Coeure’s comments that there was no deflation in the euro zone at the moment had supported the common currency.

However, failure to break above $1.3915 for a second time suggested the market lacked conviction to push the euro higher.

One stand-out performer was the New Zealand dollar, which rallied after the Reserve Bank of New Zealand (RBNZ) delivered a widely expected interest rate hike and flagged that a further 100 basis points of tightening was possible this year.

The RBNZ lifted its cash rate to 2.75 percent from a record low 2.5 percent.

The kiwi climbed to $0.8527 and was within striking distance of its Oct. 22 high of $0.8544. A break there could pave the way to the 2013 high of $0.8676.

“Today’s communication strongly suggests the RBNZ will be on the front foot for the next few meetings,” said Michael Turner, strategist at RBC in Sydney.

“We are therefore bumping up our year-end cash rate forecast by 25 basis points to 3.5 percent, and expect the RBNZ to get there via consecutive hikes at upcoming meetings before pausing to survey the impact.”

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