Thursday 7th July 2016
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The New Zealand dollar rose 0.3 percent against its trans-Tasman counterpart in response to ratings agency Standard & Poor's lowering Australia's credit outlook from stable to negative.
At 3pm in Wellington, the New Zealand dollar was trading at 95.00 Australian dollars, a rise of 0.3 cents.
Standard & Poor's says Australia has retained its AAA rating for now, but warned the negative outlook reflected its view that without the implementation of more forceful fiscal policy decisions by the government, budget deficits may persist for several years with little improvement. S&P argues that last weekend's double-dissolution election, which has so far yielded an inconclusive result, may mean further fiscal consolidation is postponed.
Mitchell McIntyre, senior corporate foreign exchange dealer at NZForex in Auckland said the downgrade was not unexpected after the election,
"Everyone knows the problems that Australia is facing. Commodity prices have been slammed over the last two years. It puts their external trade position in almost dire straits compared to what they were used to. It’s no surprise they’ve moderated their outlook, it’s almost just a wonder they haven’t done so sooner”.
McIntyre added that the dip in the Aussie had been pretty short-lived and have been viewed as a buying opportunity by many in the market.
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