Sharechat Logo

NZ dollar edges lower on Portugal downgrade, ahead of GDP data

Thursday 25th March 2010

Text too small?

The New Zealand dollar edged lower after Fitch Ratings cut Portugal’s credit rating over fears of a budget blow-out, while local investors await fourth-quarter gross domestic product data, which is expected to show economy accelerated in the final months of 2009. 

Fitch cut Portugal’s credit rating to AA- from AA and warned another downgrade might be forthcoming if it fails to rein in its budget. The news pushed stocks on Wall Street and in Europe lower as investors eschewed higher yields in favour of the US dollar, a so-called ‘safe haven’ asset. New Zealand’s economy probably grew 0.8% in the three months ended December 31, according to a Reuters survey, and the kiwi dollar will probably hold above 70 US cents today if the data comes in as expected.  

The risk aversion “was all about Portugal and its Fitch downgrade – everybody forgot about Greece and there were some massive moves in bond rates as U.S. debt was sold off,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia. “The kiwi’s well supported and it would need something significantly above 0.8% (in the GDP reading) to get the market going.”  

The kiwi slipped to 70.22 US cents from 70.38 cents yesterday, and rose to 65.67 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.47. It jumped to 64.74 yen from 63.99 yen yesterday, and gained to 77.29 Australian cents from 76.88 cents. It edged up to 52.67 euro cents from 52.54 cents yesterday, and increased to 47.16 pence from 46.97 pence.  

Kelleher said the currency may trade between 70 US cents and 70.50 cents today in what he calls a “patchy” recovery.  

The kiwi dollar “out-performed” against the euro amid the Portugal downgrade and ahead of the European Union summit which may help decide the future bail-out of Greece and that country’s fiscal woes.  

Kelleher said the New Zealand currency was strongly up against the yen as investors slowed down their repatriation of Japan’s currency ahead of month-end, and he predicts the kiwi will perform well on that cross over the next week or two.  

The U.K. government will proceed with its plan to cut its budget deficit in half, according to Chancellor Alistair Darling’s budget. Still, fiscal tightening won’t take place until the recovery is assured, and the deficit will remain around 11% of GDP this financial year.  

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar gains on G20 preference for growth
NZ dollar dips as Wellington CBD checked for quake damage
NZ dollar gains, bolstered by RBA minutes, strong dairy prices
NZ dollar falls after central bank says it may scale up currency intervention
NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street
NZ dollar trades little changed as US budget talks bear down on deadline
NZ dollar falls with equities on view US to sail over fiscal cliff
NZ dollar weakens as fiscal cliff looms, long bets unwind
NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
NZ dollar slips as fiscal cliff talks grind slower in Washington