NZ dollar plumbs six-month lows after two ratings downgrades

Article – BusinessDesk

Sept. 30 (BusinessDesk) – The New Zealand dollar is heading for a declining quarter, after being hammered today by the actions of two ratings companies, downgrading the sovereign debt rating one notch to AA.

NZ dollar plumbs six-month lows after two ratings downgrades

Sept. 30 (BusinessDesk) – The New Zealand dollar is heading for a declining quarter, after being hammered today by the actions of two ratings companies, downgrading the sovereign debt rating one notch to AA.

The kiwi dollar dropped to at 76.76 U.S. cents at 5pm in Wellington, having tumbled from as high as 78.28 cents in late New York trading the previous day. It is now at the lowest level since early April.

Finance Minister Bill English welcomed the lower dollar, saying it would deliver some offset to agricultural commodity exporters, who are seeing world prices come off highs of the last 12 months.

“We’ve seen a significant New Zealand dollar reduction which will push against the drop in export prices,” he said.

“These things only come along every year or so,” said Chris Tennent-Brown, economist at Commonwealth Bank of Australia. “It’s a big deal, it has happened but it is just one of the many things” driving the New Zealand dollar currently.

The direction of the currency will be very much driven by global events in coming days, he said.

Fitch Ratings said global volatility and the high level of offshore indebtedness could see the current account deficit billow in coming years. S&P sovereign credit analyst Kyran Curry said there was a risk that New Zealand’s external position will deteriorate further at a time when resources are stretched.

The kiwi dollar was broadly lower. On the trade-weighted index, or TWI, it fell to 68.06 from 68.18 yesterday morning and down from 69.09 the previous day.

Against the Australian dollar, the two rating agency actions are most pronounced. The kiwi fell to 78.43 Australian cents from 78.78 cents this morning and from 79.51 cents yesterday.

The kiwi sank to 58.58 yen from 58.73 yen this morning and down from 59.57 yen yesterday. It was recently at 56.53 euro cents, having edged lower from 56.47 cents this morning and from 57.20 yesterday.

The kiwi dollar also weakened to 49.08 British pence from 49.09 earlier and 49.87 yesterday.

Tennent-Brown said the New Zealand dollar may push higher in the next 12 months, assuming the U.S. avoids recession and Europe gets its sovereign debt overhang in order.

New Zealand trading links with China and Australia underpin the local economy even if there are some downside risks now, he said.

(BusinessDesk)

Content Sourced from scoop.co.nz
Original url