Wednesday 3rd August 2011
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The New Zealand dollar fell against the major currencies, as risk aversion reigned with investors fretting about sluggish global growth and debt loads in the United States and Europe.
While Congress removed fears of a United States debt default by finally passing a deficit-cutting package, the possibility remained of a downgrade of the top-notch American credit rating.
"We're going through a lot right now. The combination of the two worst storms -- retreating fundamentals and the fears going around in both the United States and Europe -- is going to put a lot of volatility in the market," said Jonathan Xiong, managing director and global investment strategist at Mellon Capital Management in San Francisco.
New evidence that the US economy has hit a rough patch emerged from a report showing consumer spending unexpectedly fell in June for the first time in nearly two years, a day after data showed sluggish US and global manufacturing.
At 8am the NZ dollar was buying US86.67c, down from US87.68c at 5pm. The kiwi was also down to 0.6099 euro from 0.6150, and fell to 66.81 yen from 67.89. The trade weighted index fell to 74.28 at 8am from 74.96.
The kiwi was little changed against the Australian dollar at A80.24c at 8am, after rising against the aussie yesterday afternoon following the Reserve Bank of Australia's decision to hold its interest rate steady at 4.75 percent.
The Australian dollar had skidded broadly after the RBA expressed concerns about acute global uncertainty, which led some investors to think it could be forced to cut in coming months.
ANZ said an attempt by the NZ dollar to move in the opposite direction to the falling aussie late yesterday had been quickly rationalised by the markets.
Overnight the move lower by the NZ dollar had continued to probe support levels.
A continuation of the correction for the NZ dollar should be the theme today, ANZ said.
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