Foreign Exchange Rates – GBP/NZD, GBP/AUD Rally as Stock Markets Drop, While USD Weakens

17 Mar 2011 at 10 AM - Written by John Cameron

STORY LINK Foreign Exchange Rates – GBP/NZD, GBP/AUD Rally as Stock Markets Drop, While USD Weakens

The Pound Australian Dollar exchange rate (GBP/AUD) is 1.6410. The Pound New Zealand Dollar exchange rate (GBP/NZD) is 2.2381.

The threat of widespread nuclear contamination in Japan continues to cast a pall over global currency markets as rumours and news cause dramatic lurches in the value of major currencies.

These moves are being further accentuated by actions by the Bank of Japan to pump liquidity into the Japanese money markets. During the overnight session, a further JPY6trillion, (the equivalent of $76bn), was made available to the markets, taking the total for the week up to JPY34trillion, (equal to over $430bn).

This huge injection of capital is designed to weaken the Japanese Yen, which has strengthened since last week’s disaster to trade to its highest level against the US Dollar for over 65 years, as Japanese multi-nationals and insurance companies repatriated funds in order to cover near-term cash calls.

It’s difficult to quantify the long-term effects of such a cash injection, but analysts have noted that world equities markets have benefitted from previous quantitative easing schemes in the US and UK, so when panic levels return to normal in the markets, it is possible that share markets will resume their bull-run, causing significant US Dollar weakness.

Meanwhile, the Indian central bank has increased interest rates from 6.50% to 6.75% to try to dampen down domestic inflationary pressures. This move has caused further near-term selling pressure on Asian stock markets.

Elsewhere, the New Zealand Dollar has come under selling pressure during the overnight session following comments by Finance Minister, who stated that the New Zealand government will be forced to borrow NZD10bn in order to re-build Christchurch after the devastation caused by the recent earthquake. English went on to comment that New Zealand’s national debt would rise to over 30% of the country’s GDP by mid-2014. This has taken the GBP/NZD rate to a 12 month high of 2.2468 overnight. The Pound also rallied against the Australian Dollar during last night’s Asian session, with GBP/AUD trading close to 1.6500 before re-tracing.

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