NZ dollar sinks to new 8-month low, German bonds hit hard

Thursday 24th November 2011

The New Zealand dollar fell to a new eight-month low after Germany failed to sell all the bonds it had offered in an auction, a sign Europe’s debt crisis is spreading to even the region’s strongest economies.

The kiwi dollar fell as low as 73.80 US cents, the lowest since March 22, and recently traded at 74.17 US cents, from 74.4 cents at 5pm yesterday.

The German debt agency failed to find buyers for 35 percent of the 6 billion euros of bonds it put up for sale. The failed auction added to concerns Europe’s debt crisis is driving away investors from the region’s assets, Bloomberg reported. The new bond carried a coupon of 2 percent - the lowest ever on an issue of German 10-year bunds.

The German bond sale shows the core European economy is starting to suffer, with “no solution in sight,” said Dan Bell, currency strategist at HiFX. “It just goes to show the deterioration in investor confidence.”

With the country’s general election two sleeps away, Bell said markets will remain uncertain until Monday.

National is well ahead in opinion polls though may not get enough votes to govern outright and would have to form a coalition with minor parties.

The latest Fairfax Media poll puts the incumbent National Party support up 1.5 percentage points to 54 percent, Labour support on about half that, up 0.1 point to 26 percent and the Green Party on about 12 percent.

The kiwi and the Australian dollar declined against the yen overnight after China’s manufacturing shrank to its lowest level in 32 months this month. China’s economic growth eased to 9.1 percent in the third quarter from 9.5 percent in the second quarter. In New Zealand, traders area waiting merchandise trade for October.

The kiwi revisited an eight-month low at 57.18 yen and recently traded at 57.32 yen from 57.29 yen yesterday. It gained to 76.35 Australian cents from 76.13 cents and rose to 47.75 British pence from 47.62 pence. It traded at 55.5 euro cents from 55.23 cents yesterday.

The trade-weighted index increased to 66.4 from 66.31, after hitting an eight-month low on Tuesday.

BusinessDesk.co.nz

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