NZ dollar may drop below 70 US

Wednesday 23rd December 2009

The New Zealand dollar may drop below 70 US cents for the first time since September if data out today shows New Zealand’s economy isn’t recovering as quickly as anticipated.

Markets are predicting New Zealand’s economy grew 0.4% in the three months through September, and if the data fails to meet expectations, the kiwi dollar may continue its slide toward new three-month lows.

The currency failed to gain any traction after data yesterday showed the country’s current account ran its first quarterly surplus in 21 years amid a rally in the US dollar. The greenback extended its gains amid a 7.4% surge in existing home sales in America last month.

“A negative result could be the kicker to get the kiwi back into the 69 US cents region,” said Mike Jones, strategist at Bank of New Zealand. “A lot of people are hesitant to sell US dollars in the final week before Christmas.”

The kiwi dropped to 70.30 US cents from 70.65 cents yesterday, and declined to 64.61 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 64.73. It was little changed at 64.53 yen from 64.52 yen yesterday, and recently traded at 80.06 Australian cents from 80.02 cents. It slipped to 49.27 euro cents from 49.32 cents yesterday, and was little changed at 43.98 pence from 43.96 pence.

Jones said the currency may trade between 70.10 US cents and 71 cents today provided the GDP data comes in as expected or ahead of forecasts. If markets are disappointed with the state of New Zealand’s economy, the next level of support is at 69.60 cents, he said.

Moody’s Investor Services joined rating agencies Fitch and Standard & Poor’s in downgrading Greece’s sovereign credit rating, cutting it A2 with a negative outlook from A1. The move adds to growing concerns about the state of the Euro-zone economy after the European Central Bank this week boosted its expectations for European bank writedowns to 553 billion euros from a previous estimate of 44 billion euros.

Stocks on Wall Street gained on the strong housing data in the U.S., though third quarter revisions to American GDP growth were cut to 2.2% annual expansion from a previous prediction of 2.8%. The Dollar Index, a measure of the greenback against six major currencies, climbed to 78.17 from 77.92.

Businesswire.co.nz

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