NZ dollar falls as global economic doubts linger

Monday 26th September 2011

The New Zealand dollar fell against the greenback as lingering fears the global economy is teetering on the brink of a recession continued to weigh on growth-linked assets such as the kiwi and Australian dollar.

The New Zealand dollar recently traded at 77.53 U.S. cents, down from 78.48 cents on Friday, and fell to 69.12 on the trade-weighted index of major trading partners' currencies from 69.71 previously.

Global stocks managed to eke out a positive close on Friday to end a week marked by some of the biggest declines on equity markets since the 2008 global financial crisis, amid speculation that global leaders would act to quell recent volatility.

On Wall Street the Standard & Poor' 500 Index rose 0.6% to 1,136.43, while Europe's Stoxx 600 Index closed 0.6% higher at 216.19. The 19-commodity Thompson Reuters Jefferies CRB Index fell 1.7% to 301.87, its lowest level in almost 22 months.

"The currency made an attempt to reverse its declines, but there is still uncertainties running into the weekend which left the kiwi on the back foot," said Alex Sinton, a senior dealer at ANZ New Zealand.

Hopes of decisive action by policymakers at the World Bank and IMF meetings on the weekend were dashed with German officials continuing to resist moves to allow the European Financial Stability Fund to borrow from the European Central Bank to fund bailouts.

Members of the G20 nations also said a Greek default looked inevitable, and IMF head Christine LaGarde warned the fund may run out of cash in coming years if the crisis escalates.

On the crosses, the kiwi recently traded at 79.27 Australian cents, down from 79.80 cents on Friday, and fell to 59.37 yen from 59.86 yen previously. It fell to 57.43 euro cents from 58.01 cents last week, and dropped to 50.12 pence from 50.88 pence previously.

The kiwi may trade between a range of 77.05 78.00, Sinton said, with the currency likely to track movements in the euro closely.

(BusinessDesk)

BusinessDesk.co.nz

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