NZ dollar sinks as Bernanke talks down US recovery

NZ dollar sinks as Bernanke talks down US recovery, Wall Street falls

By Paul McBeth

July 22 (BusinessDesk) – The New Zealand dollar declined as Federal Reserve chairman Ben Bernanke was downbeat on America’s economic recovery, spooking markets and sending stocks on Wall Street lower.

Bernanke told the Senate Banking Committee the Fed that financial conditions were less supportive of growth, and the economic outlook was “unusually uncertain.” His blunt assessment sent jitters into investors, who spurned equities and sent stocks on Wall Street lower, with the Standard & Poor’s 500 index dropped 1.3%. That’s ahead of the European Central Bank’s stress tests for the region’s lenders, which will keep investors on edge with the heightened uncertainty.

“What Bernanke said wasn’t fantastic and you’d have thought the U.S. dollar would’ve gone down – instead equities fell and took the euro, Aussie and kiwi with them,” said Alex Sinton, senior dealer at ANZ New Zealand. “No-one knows which way things are going.”

The kiwi tumbled to 71.25 U.S. cents from 71.85 cents yesterday, and dropped to 67.28 on the trade-weighted index of major trading partners’ currencies from 67.60. It declined to 62.02 yen from 62.84 yen yesterday, and fell to 81.09 Australian cents from 81.24 cents. It decreased to 55.81 euro cents from 56.00 cents yesterday, and was little changed at 46.96 pence from 46.99 pence.

Sinton said the currency may trade between 71 U.S. cents and 71.60 cents today, with uncertainty in the market pushing it to the downside.

The ANZ Roy Morgan Consumer Confidence index will probably extend its positive trend as people feel good about buying after the worst recession in 18 years. Reserve Bank data showed credit card billings climbed 1.5% last month from May.

The Bank of England’s minutes for its July meeting showed the regulator’s monetary policy committee considered both tightening and loosening policy, and one member, Andrew Sentance, voted in favour of hiking interest rates. The committee had a downbeat view on the British economy, with inflation likely to hold up longer than initially thought.

(BusinessDesk)

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