Quake costs weigh on Kiwi

Wednesday 28th December 2011

The New Zealand dollar fell against most major currencies, in subdued holiday season trading, as traders weighed the potential costs to the economy of further quakes in Christchurch and figures showed consumer confidence rose in the US.

The kiwi dollar traded at 77.10 US cents from 77.27 cents in Asia yesterday. The trade-weighted index declined to 68.82 from 69.06. The costs from the swarm of earthquakes last Friday may take two weeks to assess. They caused renewed liquefaction in eastern suburbs and prompted media speculation the damage could cost the Earthquake Commission as much as $1.1 billion.

Rebuilding Christchurch, seen as a major stimulus to the economy, has been delayed by aftershocks this year. The quakes were “enough to take the edge off the kiwi in a very illiquid market,” said Stuart Ive, senior trader at HiFX. Still, Ive “wouldn’t be surprised to see the kiwi recover. There doesn’t appear to be much new damage” in Christchurch. Ive says the kiwi dollar may trade in a range of 77 US cents to 77.50 cents in the short term.

Trading is typically illiquid in the days between Christmas and New Year, as many traders take advantage of public holidays to extend their break. US data may take the focus this week, with pending home sales and weekly unemployment claims due. The kiwi also weakened after figures showed US consumer confidence rose to an eight-month high in December, with the Conference Board’s index rising to a higher-than-expected 64.5 from 55.2 last month.

Other figures showed residential real estate prices fell more than expected in October from a year earlier. The S&P/Case-Shiller index of property values in 20 cities fell 3.4 percent. The New Zealand dollar fell to 60.03 Japanese yen from 60.26 yen yesterday and fell to 58.96 euro cents from 59.10 cents. It weakened to 49.23 British pence from 49.52 pence and declined to 75.88 Australian cents from 77.27 cents.

BusinessDesk.co.nz

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