Dollar falls to six-month low against Ausi

By Paul McBeth

Friday 27th February 2009

The New Zealand dollar fell to a six-month low against the Australian dollar amid speculation the nation's biggest trading partner will hold off sliding into recession while the domestic economy remains in a slump.

The kiwi fell to its lowest level since August 2008 against its Australian counterpart as New Zealand business confidence fell further and more employers anticipated eliminating jobs, according to the National Bank Business Outlook survey.

Fourth quarter Australian capital expenditure was well ahead of expectations as it grew 6% quarter on quarter, and combined with better-than-expected construction and retail activity, indicates Australian Q4 gross domestic product will probably avoid contracting, according to some economists.

The kiwi tumbled to 78.22 Australian cents from 78.64 cents yesterday, and rose to 51.11 U.S. cents from 51.01 cents. It dropped to 39.98 euro cents from 40.03 cents yesterday, and increased to 50.20 yen from 49.84 yen.

"The contrasting New Zealand and Australian data has encouraged investors to sell New Zealand dollars against Australian dollars," said Danica Hampton, currency strategist at Bank of New Zealand. "A key test will be 77.50 Australian cents, but it probably won't break it."

Hampton said the currency may trade between 50.50 U.S. cents and 51.50 cents today. "If we see equities rebound further, we could see the kiwi go a little bit higher," she said.

A stream of weak data from Japan is expected to continue today, and has been weighing heavily on the yen, which appears to have lost its haven status. The U.S. dollar rose above 98 yen per dollar as it nears the 100 mark, a level it hasn't reached since October last year. The kiwi rose above 50 yen for the first time since January 19.

Hampton predicts the Japanese currency's weakness will be short-lived, with the repatriation of funds likely on March 31, and she does not expect the kiwi to break above the 53.50 yen to 54 yen range.

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