Monday 19th July 2010 |
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The New Zealand dollar fell below 71 US cents as weak sentiment among American consumers and softer-than-expected corporate earnings reignited fears the world’s biggest economy faces a double-dip recession.
Stocks tumbled on Wall Street on Friday as a big decline in US consumer confidence sapped investors’ optimism about the strength of the economy’s recovery. Second-quarter corporate earnings season started strongly last week, but a string of soft performances from the likes of Google, Bank of America and General Electric kept investors downbeat, and unwilling to put money into higher-yielding, or riskier, assets.
The pessimism caught up with the kiwi dollar, which had shrugged off the risk-off environment, and the currency tumbled after reaching a two-month 73 US cents on Friday.
“The risk-off trading environment in global markets came from the big slump in US consumer confidence numbers that caught the market off-guard and lower-than-expected earnings results,” said Khoon Goh, head of market economics and strategy at ANZ New Zealand.
“There was an aggressive sell-off across the board that took its toll on the kiwi.”
The kiwi sank to 70.87 US cents from 71.70 cents on Friday in New York, and tumbled to 66.83 on the trade-weighted index of major trading partners’ currencies from 67.31. It dropped to 61.28 yen from 62.57 yen on Friday, and rose to 81.83 Australian cents from 81.57 cents. It declined to 54.93 euro cents from 55.24 cents last week, and slipped to 46.40 pence from 46.63 pence.
Goh said the currency may trade between 70.67 US cents and 71.33 cents, and might struggle to fall below 70 cents this week.
With a weak US dollar, the yen is benefiting from the risk-averse environment, and he says this cross will likely bear much of the pressure this week. Japan’s currency strengthened to 86.55 yen per US dollar from 87.25 last week.
The Australian dollar is expected to hamper the kiwi over the coming weeks after Prime Minister Julia Gillard called a general election for August 21 after rolling her predecessor, Kevin Rudd, earlier this month.
Businesswire.co.nz
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