Article – BusinessDesk
Dec. 27 (BusinessDesk) The New Zealand dollar fell against most major currencies as the looming US fiscal cliff sapped risk appetite, stoking demand for the greenback, and investors continued to unwind long positions in the kiwi and Australian dollars.
NZ dollar weakens as fiscal cliff looms, long bets unwind
Dec. 27 (BusinessDesk) – The New Zealand dollar fell against most major currencies as the looming US fiscal cliff sapped risk appetite, stoking demand for the greenback, and investors continued to unwind long positions in the kiwi and Australian dollars.
The New Zealand dollar fell to 81.76 US cents from 82.15 cents in Asian trading yesterday. The trade-weighted index fell to 73.33 from 73.68.
President Barack Obama is set to return to Washington early Thursday as he attempts to forge an agreement between Democrats and Republicans to prevent about US$600 billion in tax increases and spending cuts from taking effect on Jan. 1. As the deadline looms, the greenback has strengthened as investors are drawn back to the world’s reserve currency.
“The fiscal cliff cannot be doing any favours” for growth-linked currencies such as the kiwi, said Tim Kelleher, head of institutional FX sales at ASB Institutional. The kiwi has also fallen amid “a continuation of the unwinding of long positions,” he said.
A long position is a bet a security or currency is set to rise. The kiwi dollar was “overheated” when it topped 84 US cents in mid-December, he said. Still, the currency should find support around 81.50 cents because exporters “are pretty happy to buy back down here.”
The kiwi dollar traded at 70.05 yen from 70.08 late yesterday.
Japan’s next finance minister, Taro Aso, reportedly said the government is looking at comprehensive measures to counter the yen’s strength.
The kiwi fell to 50.70 British pence from 50.90 pence and dropped to 61.82 euro cents from 62.20 cents. It declined to 78.85 Australian cents from 79.29 cents.