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A
1.5 percent surge for the New Zealand dollar after interest
rates there were kept on hold had been by far the biggest move
on major currency markets in Asian trading and early in Europe's
day.
But the yen's jump to its strongest in three years against the
euro <EURJPY=> and to five-week highs against the dollar
dominated morning trade in London. <JPY=>
Worries over euro zone banks, and a sluggish global economy more
generally, have been fuelled by signs that money managers are
considering hoarding cash in bank vaults, given the lack of
return on capital.
"There is the whiff of risk-off sentiment in the market and that
is definitely helping the yen," said Alvin Tan, a strategist
with French bank Societe Generale in London.
"The dollar has generally been a safe haven, particularly
against emerging market currencies. But it remains
underperforming against the more traditional safe havens like
the yen."
The Swiss franc was also up for a fourth day running against the
euro. <EURCHF=> It has gained more than 2 percent in the last
week, with dealers citing flows of capital taking shelter from
risks due to Britain's vote on EU membership on June 23.
Sterling itself was down around a third of a percent against
both the dollar and the euro. <GBP=> <EURGBP=>
New Zealand's Reserve Bank surprised some investors who had been
betting on a rate cut and its concerns over rising house prices
and emerging inflationary pressures cooled expectations that the
bank will cut soon.
While growth remains shaky and price growth extremely low, along
with its Australian and Canadian counterparts, the kiwi dollar
has been steadily recovering since reaching long-term lows in
January of this year.
By noon in London it was up 1.2 percent at $0.7106, off a high
of $0.7148 hit in Asian time. <NZD=D4>
"The kiwi went on a rampage after the RBNZ kept rates on hold,"
said Tobias Davis, head of corporate treasury sales at Western
Union in London.
"Governor Wheeler's comments centred around data being a
decision driver, inflation expectations anchoring and the fact
that strong property prices were a cause for concern. We think
downside risks remain, along with the chance of a cut in
August."
(Editing by Gareth Jones)
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