NZ dollar falls vs euro after EU hints at Spanish rescue

Wednesday 29th August 2012

The New Zealand dollar fell to a two and a half month low against the euro after European Union President Herman Van Rompuy said the region's rescue fund is ready for rapid action to aid Spanish banks.

The New Zealand dollar fell to 63.99 euro cents at 8am, the lowest since July 6, from 64.66 cents yesterday. The kiwi declined to 80.45 US cents from 80.71 cents and the trade weighted index decreased to 72.21 from 72.64.

Europe's shared currency advanced against the kiwi after Van Rompuy said the region's rescue fund is ready to act and Spain sold more government bills than its maximum target at an auction. European Central Bank President Mario Draghi also cancelled his trip to the annual central bank summit in Jackson Hole, Wyoming, where he was scheduled to deliver a speech on Saturday.

"The kiwi has probably done its moves on the downside (against the euro) - we will be looking to consolidate," said Stuart Ive, currency strategist at HiFX. "It's all hands to the pump in terms of anyone at the ECB."

Markets are waiting for the Jackson Hole symposium which kicks off on Friday. Federal Reserve chairman Ben Bernanke will now be the main highlight, with officials looking for guidance on stimulus measures.

Ive said the kiwi has also "corrected dramatically" on all the major crosses after local dairy exporter Fonterra Cooperative Group yesterday cut its 2013 forecast payout to farmers, citing falling commodity prices and a strong currency.

The New Zealand Institute of Economic Research's quarterly forecast released today said higher prices for oil and basic foods could see prices rising in supermarkets by early next year. The NZIER sees the economy growing on 1.7 percent this year, on-trend with the Treasury's May Budget forecast of 1.6 percent.

There is no other significant New Zealand data set for release today.

The New Zealand dollar fell to 77.49 Australian cents from 77.92 cents and dropped to 50.80 British pence from 51.11 pence. The kiwi declined to 63.15 yen from 63.37 yen.

BusinessDesk.co.nz

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