NZ dollar extends slide amid concerns Greek govt stalled

NZ dollar extends slide amid concerns Greek government stalled

By Paul McBeth

May 9 (BusinessDesk) - The New Zealand dollar extended its decline through the local session amid concerns Greece won't be able to form a government after its general election threw up a hung parliament, stalling Euro-zone-wide budget cuts designed to end the region's sovereign debt crisis.

The kiwi fell to 78.43 US cents at 5pm from 78.75 cents at 8am and 79.29 cents yesterday. The trade-weighted index declined to 70.45 from 70.94 yesterday.

Stock markets around Asia and the Pacific declined as investors spurned higher-yielding assets amid fears Europe could be plunged into yet another debt crisis with the Greek Parliament struggling to form a government. Australia's S&P 200 Index fell 1.1 percent in afternoon trading, while Hong Kong's Hang Seng declined 0.9 percent and Japan's Nikkei 225 index dropped 1.4 percent.

"The market never likes uncertainty - that's at the heart of the matter, and does Greece go back to square one if they turn their back on the austerity measures," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. The kiwi dollar has declined as "the market is pretty averse and the US dollar is pretty well-bid with all the concerns about Greece and uncertainty about."

The recent decline in the kiwi has eased expectations the Reserve Bank will cut rates in the near future. Deputy Governor Grant Spencer told Parliament's finance and expenditure committee New Zealand's growth prospects and relative stability are one of the attractions for investors, and that's stoked demand for the kiwi.

Traders have priced in 33 basis points of cuts to the 2.5 percent official cash rate over the coming 12 months, according to the Overnight Index Swap curve.

CBA's Tennent-Brown said those bets should be removed every time the kiwi comes down, as the currency's strength is what has been raising the Reserve Bank's ire.

The currency's "moving in the right direction" and probably won't go up until commodity prices start improving, he said.

The kiwi rose to 78.01 Australian cents from 77.84 cents yesterday, and dropped to 62.56 yen from 63.42 yen. It fell to 60.47 euro cents from 60.85 cents yesterday, and decreased to 48.61 pence from 49.02 pence.

(BusinessDesk)

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