Dollar slips from 11-month high

Monday 17th August 2009

The New Zealand dollar slipped from an 11-month high after US consumer confidence unexpectedly dropped this month, sparking concerns the global recovery may not be as fast or as strong as earlier anticipated, and discouraging investors from seeking higher-yielding, or riskier, assets.

The Reuters/Michigan preliminary index of consumer sentiment slipped 4.2% this month, causing investors to take a more negative view of the outlook for the world’s largest economy.

The Standard & Poor’s 500 index fell 0.9% on Friday and closed the week lower for the first time in five weeks, stoking fears the US may not lift itself out of recession as easily as previously anticipated.

The Dollar Index, a measure of the greenback versus a basket of currencies, gained 0.4% as investors sought the relative safety of the US dollar over higher-yielding currencies like the kiwi.

“The Michigan survey pretty much sparked the trouble on Friday,” said Danica Hampton, currency strategist at Bank of New Zealand. “There are now concerns the US consumer won’t be able to pull the economy out of recession.”

The kiwi tumbled to 67.46 US cents from as high as 68.80 cents after it traded at 68.02 cents on Friday in New York.

It dropped to 62.97 on the trade-weighted index, or TWI, a measure of the currency versus the Australian dollar, yen, euro, greenback and pound, from 63.21 last week, and gained to 81.22 Australian cents from 80.80 cents. It slipped to 47.52 euro cents from 47.64 cents last week, and declined to 63.90 yen from 64.67 yen.

Hampton said the currency may trade between 66.80 US cents and 68.20 cents today as it begins to ease from the highs it enjoyed last week.

“Any weakness will be from risk appetites, so we’ll be watching Asian and global equities,” she said.

Businesswire.co.nz

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