Dollar falls before G-20 as greenback gains

By Paul McBeth

Monday 30th March 2009

The New Zealand dollar fell as the greenback advanced against most major currencies after a slide in shares on Wall Street sapped investor appetite for higher-yielding, or riskier, assets.

The US dollar gained against the euro and the pound after chief executives at JPMorgan Chase and Bank of America warned of deteriorating results in March, helping drive stocks lower. The Dow Jones Industrial Average slid 1.9% on Friday.

Currency traders will be watching the London meeting of Group of 20 leaders this week, where debate is likely to include issues around quantitative easing, stimulus packages, increasing the International Monetary Fund's resources, and the status of the US dollar as the reserve currency.

"Equities, with financials leading the way lower, lost ground on Friday, taking risk trades off the table," said Mike Symonds, head of sales and foreign exchange at Bank of New Zealand. If the G-20 retains the US dollar's status as reserve currency, the dollar "will get moved a leg higher, undermining the euro and sterling."

The kiwi fell to 56.75 US cents from 57.30 cents last week, and slid to 55.65 yen from 56.23 yen. It rose to 82.02 Australian cents from 82.01 cents, and gained to 42.87 euro cents from 42.31 cents.

Symonds said the currency may trade between 56.60 US cents and 57.20 cents today as global events push the dollar down after its strong gains in March. The outcome of the G-20 meeting will be announced in a media conference on April 2.

Meantime, economic data this week is expected to underline the continued weak state of the global economy.

The US jobless rate rose to 8.5% in March, its highest level since 1983, according to a Bloomberg survey. Labor Department figures this week may also show payrolls fell by 660,000 workers, bringing recessionary jobs losses to 5 million.

The European Central Bank meets this week, and is expected to cut interest rates to 1%. The central bank is not likely to begin a policy of quantitative easing, with "Europe still at odds with the US and UK" over their approach to the global recession, Symonds said.

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