By Paul McBeth
Tuesday 11th November 2008
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Fears that Google and Goldman Sachs Group may post fourth-quarter losses overshadowed an initial rally in US stocks after China announced a US$586 billion bailout package. Goldman fell as much as 12%, while Google sank 5.7%. In New Zealand, the incoming government gets its first look at the country’s accounts tomorrow, which may show a worse picture than the pre-election fiscal update.
“The global slowdown is bad for growth-sensitive currencies like the kiwi and Australian dollars,” said Danica Hampton, currency strategist at Bank of New Zealand. “Everyone knows the prospects in New Zealand are pretty ugly.”
The kiwi fell to 58.31 US cents from 59.86 cents yesterday, and slumped to 57.15 yen from 59.37. It dropped to 45.61 euro cents from 46.49, and slipped to 86.80 Australian cents from 87.82 cents.
The currency may trade in a range of 57.50 US cents to 59 cents today, Hampton said. New Zealand’s dollar has been a favourite for the carry trade because of the nation’s relatively high interest rates.
The kiwi has slumped 25% against the US dollar this year, with the slide accelerating after the central bank in July embarked on its steepest easing cycle since the official cash rate was introduced in 1999. Governor Alan Bollard may slash the OCR by a further 75 basis points to 5.75% in December, according to economists at ANZ National Bank.
Figures this week may show the economic slump isn’t abating, with weaker retail sales expected on Thursday. So far this month, retailers including Warehouse Group, Briscoe and Smiths City have said earnings will be hurt by the downturn.
The economy fell into recession in the first half of the year and some economists say it probably won’t revive this year.
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