NZ dollar falls as Moody's downgrades Greece’s credit rating

NZ dollar falls as Moody's downgrades Greece’s credit rating

By Jason Krupp

March 8 (BusinessDesk) - The New Zealand dollar fell as investor appetite for riskier, or higher yielding, assets declined amid a downgrade of Greece's debt rating, ongoing oil price volatility and the looming interest rate announcement on Thursday

Ratings agency Moody’s Investors Service slashed Greece's credit rating by three notches to Ba1, raising the possibility that the country may have to restructure its sovereign debt sooner than the original 2013 deadline. That downgrade takes the Greek rating below that of Egypt. Demand for commodity-link currencies, such as the New Zealand and Australian dollars, also came under pressure as continued oil price volatility prompted the U.S. to say it may consider tapping its reserves to smooth recent price spikes.

"Three notches is pretty severe," said Tim Kelleher, head of institutional FX sales New Zealand at ASB Institutional. "The expectation of an ECB rate hike in April offsets that a bit” though the downgrade “is adding to the negative tone."

The kiwi fell to 73.60 U.S. cents from 73.70 cents yesterday, and was little changed at 64.93 on the trade-weighted index of major trading partners’ currencies from 64.99. It recently traded at 60.46 yen from 60.63 yen yesterday, and rose to 72.85 Australian cents from 72.75 cents. It was unchanged at 52.72 euro cents, and rose to 45.45 pence from 45.33 pence yesterday.

Movements in the kiwi dollar were muted ahead of Thursday's official cash rate announcement, when the Reserve Bank is expected to cut rates. The market is currently pricing a 30 to 35 basis point adjustment, with a 25 point call likely to see the dollar rise, while a 50 point cut will probably see it fall.

The kiwi is expected to trade in a range of between 73.40 U.S. cents and 74.20.

(BusinessDesk)

© Scoop Media