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NZ dollar falls to 2-week low vs. greenback, gains vs. euro on Europe's crisis

Wednesday 14th December 2011

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The New Zealand dollar fell to a two-week low against the greenback and gained versus the euro after Moody’s Investors Service lowered the outlook on nations on the periphery of Europe, suggesting last weekend’s summit hasn’t allayed debt fears.

The kiwi fell to 76.11 US cents at 8am, from 76.36 cents at 5pm. It dropped to a low of 76.11 cents overnight. The kiwi climbed to 58.19 euro cents, the highest in a week, from 57.85 cents yesterday.

The euro sank to an 11-month low against the US dollar amid speculation last weekend’s summit of EU leader has failed to placate the credit rating companies.

Moody’s lowered the outlook on debt ratings for Bulgaria, the Czech Republic, Latvia and Lithuania to stable from positive. It also placed eight Spanish banks on review for a possible downgrade. Separately, Fitch Ratings cut Italy's largest insurer, Assicurazioni Generali, to A- from AA- overnight.

“The twists and turns in the European debt crisis continue,” said Mike Burrowes, currency strategist at Bank of New Zealand. “Overnight, the markets continued to worry that the latest EU plan will be insufficient to stem the crisis.”

The New Zealand dollar weakened against the greenback after the Federal Reserve reiterated its intention to keep interest rates in the world’s biggest economy near zero through until mid-2013. Reserve Bank of Australia deputy governor Ric Battellino will speak in Sydney at 4.30pm New Zealand time.

The New Zealand dollar has been mostly on a downward path against its Australian counterpart since mid-August and is currently trading at 75.64 cents, down from 80.77 cents in September.

“The kiwi is on the downward range” against the Australian dollar, said Stuart Ive, currency strategist at HiFX. “If Battellino talks about policy then that will have a bearing on the kiwi dollar,” he said.

The kiwi was at 59.33 yen from 59.45 yen yesterday. It rose to 49.05 British pence from 48.92 pence. The trade-weighted index increased to 68.17 from 68.11.

BusinessDesk.co.nz



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