Sharechat Logo

New Zealand dollar continues to test six month lows on European woes

Wednesday 5th October 2011

Text too small?

The New Zealand dollar is continuing to test six-month lows as equity markets again succumb to concerns about European sovereign debt even though local milk powder prices were better than some analysts expected at Fonterra's latest online auction.

The kiwi was at 74.90 U.S. cents at 8am after falling to 74.80 U.S. cents, its lowest level since March 24, in overnight trading. It remained below the 75.30 U.S. cents at 5pm yesterday.

Prices for all products Fonterra auctioned fell 1.6%, but Mike Burrowes, market strategist at Bank of New Zealand, said that "thanks to a collapsing New Zealand dollar", prices in New Zealand dollar terms rose 7.6% overall.

"We were more in the camp that there may be a large decline in dairy prices in this auction, but that hasn't happened. We see the auction as a net positive," he said.

Still, the main driver of the currency market was developments in the European debt crisis, he said.

The U.S. equity market was again in negative territory as the New Zealand day began, having given up earlier gains.

Worries that the bailout of Greece will unravel and European banks will collapse continued to haunt investors even after Federal Reserve chairman Ben Bernanke said he was ready to take more steps to boost growth in the U.S. economy.

Euro-zone finance ministers have reached a deal to provide collateral to Finland, but Greece's failure to meet deficit targets and worries about Franco-Belgian bank Dexia SA's exposure to Greek government debt are dominant themes at the moment.

The Standard & Poor's 500 Index was down 1.2%. It had been ahead 0.3% on demand from bargain hunters in a market trading at a 13 month low.

The New Zealand Institute of Economic Research’s quarterly survey of business opinion yesterday showed local firms were less optimistic about this country’s recovery, adding to the general state of uncertainty in markets.

The Reserve Bank of Australia held its target cash rate at 4.75% yesterday, as expected, with Governor Glenn Stevens citing the volatility in global financial markets as a brake on both domestic growth and inflation.

The kiwi rose to 79.65 Australian cents from 79.44 cents yesterday. It fell to 57.64 yen from 57.72 yen yesterday and rose to 57.64 euro cents from 57.06 euro cents yesterday. It was at 67.70 on the trade-weighted index from 67.93 yesterday. The kiwi dollar was little changed at 48.69 from 48.80 British pence yesterday.


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar gains on G20 preference for growth
NZ dollar dips as Wellington CBD checked for quake damage
NZ dollar gains, bolstered by RBA minutes, strong dairy prices
NZ dollar falls after central bank says it may scale up currency intervention
NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street
NZ dollar trades little changed as US budget talks bear down on deadline
NZ dollar falls with equities on view US to sail over fiscal cliff
NZ dollar weakens as fiscal cliff looms, long bets unwind
NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
NZ dollar slips as fiscal cliff talks grind slower in Washington