NZ dollar falls on European debt, China concerns

Monday 15th November 2010

The New Zealand dollar fell as global investors shunned risk on European sovereign debt concerns and the prospect of further policy tightening in China.

Europe's sovereign debt was again in the spotlight as Ireland rejected speculation that it was in talks over a possible bailout, despite coming under pressure from European Union member countries to accept financial aid to quell volatility in the market. Sentiment was also hurt by indications of further interest rate hikes in China, which could dampen global growth.

"Rising global risk aversion was the theme of Friday's offshore session, with talk of an Irish bailout and markets alert for Chinese policy changes," said Mike Jones, markets strategist for Bank of New Zealand. "It was just a night of gloomy sentiment and that tended to dent demand for the kiwi dollar and boost demand for safe haven currencies such as the US dollar and the yen."

The kiwi fell to 77.24 US cents from 77.56 cents on Friday in New York, and fell to 69.00 on the trade-weighted index of major trading partners currencies from 69.23. It slipped to 78.44 Australian cents from 78.57 cents last week, and fell to 63.72 yen from 63.76 yen. It fell to 56.50 euro cents from 56.93 cents last week, and declined to 47.92 pence from 48.30 pence on Friday.

On the cross rates, Jones said the focus for the week will be on the kiwi-euro, which has surged on the back of renewed European debt worries, and could break through the 58 euro cents mark later in the week, a level last seen in June.

He expects the currency to trade in a range of between 77 US cents and 77.90 cents today.

Businesswire.co.nz

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