New Zealand earthquake triggers a fall in the NZ Dollar

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It was a US holiday yesterday for Washington's Birthday so the European markets took on greater significance in terms of trading and it seems the markets didn't like what they saw from the Middle East.

The equity markets in Europe dropped across the board as the violence escalated, whilst oil prices surged as threats to oil supply continued to worry the market. The foreign currency transfer markets seemed caught in the headlights and didn't know which way to go initially, before adopting risk averse strategies which saw the US Dollar, Japanese Yen and Swiss France strengthen. 

If risk sentiment continues to deteriorate the Australian Dollar and New Zealand Dollar could be vulnerable, especially after the recent interest rate rise in China.

The issue of which currencies offer the safest haven was made more complicated yesterday when Ratings agency Moody's muddied the waters by changing it's outlook on the Japanese Yen from stable to negative. Misgivings about the US prevented a rush into the US Dollar, ongoing concerns in Portugal stopped investors going for the Euro after another ECB board member said that the ECB is "prepared to act decisively and immediately if needed".

The New Zealand Dollar took a fall overnight after Christchurch was rocked by an earthquake measuring 6.3 on the Richter scale with widespread damage to buildings and infrastructure. The New Zealand Dollar tumbled on the news, opening up nearly 4 cents higher than yesterday at the highest level since September 2010.

Today, the US house price index, Canadian retail sales and US consumer confidence will dominate the US session with the UK's contribution is January's figure of public sector net borrowing. Economists are are optimistically predicting a net repayment which, if it happens, should be good for Sterling.