Sharechat Logo

NZ dollar falls to 5-month low in face of Greek impasse

Tuesday 15th May 2012

Text too small?

The New Zealand dollar fell to a five-month low as Greek politicians struggled to form a new government, heightening speculation the nation may leave the euro region and sapping investors’ risk appetite.

The New Zealand dollar fell as low as 77.55 US cents overnight, the lowest the currency has fallen since Dec. 26. It traded at 77.78 cents at 8am, down from 78.16 cents yesterday at 5pm. The trade weighted index decreased to 70.19 from 70.40.

Greece's political stalemate has entered its second week, fueling fears the nation will renege on pledges to cut spending under the two bailouts negotiated since May 2010. Any new government needs to stick to the terms to receive the funds required to avoid bankruptcy or risk leaving the euro. So far Greece's three main political parties have been unable to reach a coalition agreement.

"Instead of rescue efforts, talk amongst European leaders is increasingly shifting towards managing a Greek exit," said Mike Jones, currency strategists at Bank of New Zealand. "Until we see some resolution to the Greek crisis, it will be a path of least resistance for the kiwi."

Euro zone finance ministers are currently meeting in Brussels, where they are believed to be discussing the situation in Greece and Spain, where the government made its fourth attempt to clean up the banks, last week. European Union finance ministers are also set to meet on Tuesday.

"We should start to see headlines across the wires from that but I don't think we will see any concrete resolutions," Jones said.

Traders will be eyeing the first meeting between new French President Fraincois Hollande and German chancellor Angela Merkel on Wednesday. Hollande, Nicolas Sarkozy's successor, has already distanced himself from the region’s austerity push.

A data heavy week kicked off in Europe with industrial production figures unexpectedly declining in March. Production in the 17-nation euro area slipped 0.3 percent in March, when compared with a month earlier. Economist had forecast a 0.4 percent increase, according to a Bloomberg survey.

Euro-zone gross domestic product is set for release on Tuesday, while inflation, trade balance and unemployment figures are due out on Wednesday.

In the world's largest economy, the US, consumer prices and retail sales are due out today.

In New Zealand's largest export market, Australia, the Reserve Bank will release minutes from its May meeting today. The RBA slashed half a percentage point from its benchmark interest rate to 3.75 percent, citing a persistently high currency and slowing output growth.

There is no significant data scheduled for release in New Zealand today.

The New Zealand dollar was unchanged on 60.59 euro cents from 5pm yesterday. The kiwi fell to 77.79 Australian cents from 78.04 cents and slipped to 48.31 pence from 48.65 British pence. It dropped to 62.08 yen from 62.53 yen.

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
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