NZ dollar falls amid Greek rescue fears, Moody’s warns banks

NZ dollar falls amid Greek rescue fears, Moody’s threatens banks

By Paul McBeth

Feb. 16 (BusinessDesk) – The New Zealand dollar sank more than 1 US cent in local trading after investors’ optimism was burst by fears Greece’s rescue package will be put off until after the April election and Moody’s Investors Service put a raft of banks around the world on notice.

The kiwi sank to 82.78 US cents at 5pm from 83.33 cents at 8am, and 83.84 cents yesterday. It dropped to 73.13 on the trade-weighted index from 73.84 yesterday.

Investors spurned so-called risk sensitive assets after European finance ministers struggled to reach agreement over Greece’s rescue package, raising speculation the heavily indebted nation will have to wait until after its April general election before getting access to the fund. That paves the way for a backlash among jilted voters, who may reject the deep cuts to public spending.

Optimism was dashed further by news rating agency Moody’s said it may cut the credit ratings of 114 European financial institutions across 16 nations due to the deteriorating situation in the Euro-zone.

“The whole Greek thing hasn’t been resolved at all,” said Tim Kelleher, head of institutional FX sales at ASB Institutional. “The kiwi is looking heavy above 83.50 US cents.”

Still, Kelleher said New Zealand’s currency may get a fillip through the Northern Hemisphere trading sessions after a headline said rating agency Standard & Poor’s was “very comfortable” with New Zealand’s double-AA rating.

The kiwi sank to 77.45 Australian cents from 78.02 cents yesterday after government figures showed Australia’s unemployment rate unexpectedly fell to 5.1 percent last month. Payrolls climbed by 46,300, beating the expectation among economists surveyed by Bloomberg that 10,000 jobs were added in the month.

A slew of US data will underpin investor sentiment through the Northern Hemisphere session, including the Philadelphia Federal Reserve’s business outlook survey, and housing figures.

Reserve Bank of New Zealand Governor Alan Bollard will deliver a speech tomorrow where he’s expected to talk up the nation’s prospects compared to the rest of the world.

The Treasury today cut its growth forecasts over the next two years, with a particular risk in the first half of this year in between the Rugby World Cup last year and the assumed acceleration of the Canterbury rebuild.

The Treasury now predicts gross domestic product will expand 1.9 percent in the year ended March 31, 2012, and 2.8 percent in 2013, down from 2.3 percent and 3.8 percent flagged in the pre-election economic and fiscal update. Growth in the following 2014 year is forecast to expand at a pace of 3.8 percent compared to a previous 3.3 percent.

The kiwi dropped to 63.54 euro cents from 63.66 cents yesterday, and declined to 52.79 pence from 53.32 pence. It fell to 63.54 yen from 65.81 yen yesterday.

(BusinessDesk)

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