Kiwi falls on talk of double-dip recession

Wednesday 9th February 2011

The New Zealand dollar fell today after Finance Minister Bill English spoke about the possibility of a double-dip recession.

The NZ dollar had pushed to its highest level against the greenback in nearly a week in very early trading and was drifting lower when it reacted to comments English made to a parliamentary committee.

The NZ dollar was at US77.13c at 5pm, down from US77.53c at 8am and the US77.90c it reached at 6.45am. It was down from US77.20c at 5pm yesterday.

The market was "long", meaning many traders held long positions, before English spoke.

While local investors took the view that English was managing expectations after the economy contracted 0.2% in the September 2010 quarter, foreign investors reacted to the comments.

The US dollar has been weaker as investors ventured away from safe-haven currencies after tensions in Egypt eased.

A surprise 25-basis point Chinese rate hike - at midnight (NZT) - did little to disrupt upbeat sentiment that had characterised financial markets of late.

An attempt by Prime Minister John Key yesterday to jawbone the NZ dollar, reiterating the headwinds faced by this country's export sector from the strengthening kiwi, had earlier only a fleeting effect on the currency.

The NZ dollar reached a three-week high against the European currency, around 0.5710 euro about 10pm yesterday, then fell away to 0.5652 by 5pm, which compared with the 0.5671 at the same time yesterday.

Against the aussie, the NZ dollar fell to A76.08c at 5pm from A76.37c at 8am from A76.11c at 5pm yesterday, and was little changed at 63.56 yen from 63.54. The trade weighted index was little changed at 68.51 from 68.54 yesterday.

NZPA

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