Dollar little changed

By Paul McBeth

Thursday 19th February 2009

The New Zealand dollar is little changed around 51 US cents as investors flocked to the US dollar after the President Barack Obama pledged to curb home foreclosures, a move that may help lift the property market out of a prolonged slump.

The US Treasury will buy as much as US$200 billion of preferred stock in Fannie Mae and Freddie Mac to help as many as five million homeowners refinance their mortgages. President Obama proposed using US$75 billion, mostly from the financial bailout fund, to reduce repayments to 31% of a borrower's monthly income. In Europe, investors are bracing for the impact of a further deterioration in east European economies, which will hurt earnings at their local subsidiaries.

"The US dollar continued to strengthen as concerns about the Eurozone, UK and Japan took centre stage," said Danica Hampton, currency strategist at Bank of New Zealand. "While the new US stimulus package has the potential to inject some optimism into the markets, we suspect this will be overshadowed by fears about the financial sector and emerging economies."

The kiwi fell to 51.04 U.S cents from 51.20 cents yesterday, and rose to 47.72 yen from 47.32 yen. It dropped to 79.83 Australian cents from 79.86 cents, and was down to 40.58 euro cents from 40.64 cents.

The currency may trade between 50.75 US cents and 51.25 cents today, said Tim Kelleher, corporate risk manager at ASB Bank. There was support for the kiwi between 50 cents and 50.50 cents, and when it breaks the bottom level he expects to see some support for the New Zealand dollar in this range.

"There was talk that Moody's was reviewing Aussie banks" and if the credit rating service is looking at Australia's financial sector, it will probably put the New Zealand currency under downward pressure, Kelleher said.

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