NZ dollar falls amid global worries

Wednesday 6th July 2011

The New Zealand dollar slipped against a generally stronger greenback, and fell back from gains that had been made against the euro amid concerns about monetary tightening in China and soft euro-zone economic data.

The kiwi was unable to benefit from the move by Moody's Investors Service late in the overnight session to cut Portugal's credit rating to junk, pushing the euro down against the US dollar and the Swiss franc.

At 8am the kiwi was buying US82.46c and 0.5717 euro, down from US82.82c and 0.5727 euro at 5pm yesterday.

Moody's cut Portugal's credit rating by four levels to Ba2, two notches into junk territory, saying there was great risk the country will need a second round of official financing before it can return to capital markets.

Earlier, a report said retail sales in the 17 countries that use the euro dropped 1.1 percent in May, the latest sign of slowing economic growth.

There are also worries about slower growth in China, the world's No 2 economy, where inflation poses a danger. Barclays economist Jian Chang expects an interest rate increase in July. That could weigh on growth and hurt the companies around the world that sell goods to China.

BNZ currency strategist Mike Burrowes said other pressure on the NZ dollar came from a 6.7 percent fall in global dairy prices at Fonterra's latest auction, although the result was not unexpected given recent falls in other soft commodity prices.

The NZ dollar fell to A77.13c against the Australian dollar at 8am from A77.62c at 5pm, while also dropping to 66.82 yen from 67.15. The trade weighted index was 71.10 at 8am from 71.39 at 5pm.

NZPA

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