Kiwi edges lower as Ireland's credit rating cut

Tuesday 20th July 2010

The New Zealand edged lower as European stocks declined on Ireland’s sovereign credit rating cut, while solid earnings in the US offset weak American housing data.

Moody’s Investors Service cut Ireland’s rating to Aa2 from Aa1 a day bringing it in line with Standard & Poor’s, though the downgrade came a before the nation was looking to sell 1.5 billion euros of debt.

Stocks in Europe fell on the downgrade, while strong earnings from government contractor Halliburton helped Wall Street rally from its sell-off on Friday, and encouraged investors to ignore soft housing data.

Some 21 out of 24 companies listed on the Standard & Poor’s 500 index have beaten forecast earnings per share estimates, and 17 exceeded revenue predictions.

“Earnings continue to come in pretty high compared to predictions” and stoked a rally on Wall Street “after a vicious sell-off on Friday – it will be interesting to see whether it can hold those gains,” said Imre Speizer, market strategist at Westpac.

“It was an evening of consolidation in most markets, but the kiwi still looks soggy over the week.”

The kiwi slipped to 70.61 US cents from 70.78 cents yesterday, and dropped to 66.49 on the trade-weighted index of major trading partners’ currencies from 66.63.

It fell to 61.30 yen from 61.53 yen yesterday, and declined to 81.17 Australian cents from 81.45 cents. It was little changed at 54.50 euro cents from 54.58 cents, and was unchanged at 46.31 pence.

Speizer said the currency may trade between 70.30 US cents and 71 cents today, and may take its direction from the release of the Reserve Bank of Australia’s July minutes today.

Traders will be looking for any indication as to how the central bank views Australia’s inflation track, and are unsure if Governor Glenn Stevens will hike interest rates if the consumer price index increases by less by 1% in the June quarter. Australian CPI probably rose a quarterly 1%, according to a Reuters survey.

Speizer said the kiwi was broadly trading in a range against its Australian counterpart, and while he expects it to rise to between 84 and 86 cents later this year, he said it faces some downward pressure in the short-term, and could pull back to 80 cents.

Businesswire.co.nz

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