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Kiwi holds below US70c after SCF receivership

Wednesday 1st September 2010

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The New Zealand dollar held below 70 US cents after it tumbled 1.2% yesterday on the collapse of South Canterbury Finance, the nation's second-biggest finance company.

SCF called in the receivers yesterday after its board failed to close a deal that would have injected new cash and kept the financier afloat, triggering the government to pay out $1.6 billion under the retail deposit guarantee.

Though rating agency Standard & Poor's alleviated concerns about the impact on New Zealand's credit rating, the collapse saw investors flee the kiwi. Australian data is expected to show the so-called ‘lucky country's' economy grew 0.9% in the second quarter, which will probably ease some investors' concerns about Australasia.

"Our traders had their focus on all of the (South Canterbury) headlines, and the kiwi steadily slid through the day," said Chris Tennent-Brown, economist at Commonwealth Bank of Australia.

"Australian GDP is the main thing today and has the potential to improve the mood" of investors, he said.

The kiwi extended its decline to 69.76 US cents from 69.85 cents yesterday, and edged lower to 65.38 on the trade-weighted index of major trading partners' currencies from 65.48. It fell to 58.60 yen from 58.95 yen yesterday, and decreased to 78.25 Australian cents from 78.96 cents. It was little changed at 55.00 euro cents from 55.04 cents yesterday, and rose to 45.45 pence from 45.26 pence.

Tennent-Brown said the currency may trade between 69.50 US cents and 71.50/72 cents today, with the Australian GDP figure likely to push it above 70 cents if it shows the economy is still chugging along.

The ANZ Commodity Price Index out today will probably show the price of locally produced raw materials probably fell last month, with Fonterra Cooperative Group's August online auction sinking to an 11-month.

Fonterra's globalDairyTrade will hold the first of its bi-monthly auctions today in the US, and the dairy exporter is expecting a bounce after it held its forecast pay-out to farmers amid the decline in prices.

Global investor sentiment was muted in the Northern Hemisphere sessions, with the Federal Reserve's minutes for its August meeting confirming fears about the state of the world's biggest economy. Stocks on Wall Street were flat, while European shares edged higher.

Businesswire.co.nz

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