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NZ dollar heads for 1.8 percent weekly decline as market sentiment sours

Friday 19th April 2013

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The New Zealand dollar is heading for a 1.8 percent fall against the greenback as optimism about the health of the global economy fades, sapping demand for risk-sensitive assets.

The kiwi rose to 84.34 US cents at 5pm in Wellington from 84.11 cents at 8am, down from 84.52 cents yesterday. The trade-weighted index fell to 77.81 at 5pm from 78 and is heading for a 1.7 percent decline.

Weak US corporate earnings, soft American data and a collapse in the price of previous metals took the wind out of investor optimism this week, with stocks and risk-linked currencies including the kiwi and Australian dollars falling.

"Offshore markets are still a little bit meek and a little uncertain," said Mike Jones, currency strategist at Bank of New Zealand in Wellington. "The kiwi should stay on the back-foot for the next few sessions."

The pace of the kiwi's weekly decline was slowed after Bloomberg reported a draft statement from the Group of 20 nations will affirm a commitment to avoid devaluing currencies without taking a stab at Japan's massive monetary stimulus that severely weakened the yen. The G20 is set to meet in Washington this weekend. The kiwi climbed to 83.04 yen from 82.92 yen yesterday.

"Recent rhetoric suggests there isn't really the angst towards Japan some were fearing," Jones said.

Locally, trading are preparing for next week's official cash rate review by the Reserve Bank. Governor Graeme Wheeler isn't expected to move the benchmark rate, though he may try and talk down the kiwi, which has been trading above the central bank's projections in the March monetary policy statement.

The kiwi fell to 81.72 Australian cents from 82.02 cents yesterday and dropped to 55.13 British pence from 55.40 pence. It declined to 64.33 euro cents from 64.75 cents yesterday.

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