NZ dollar falls ahead of current account, GDP
By Paul McBeth
Dec. 22 (BusinessDesk) – The New Zealand dollar fell ahead of third-quarter balance of payments and gross domestic product, and amid the prospect of more sovereign rating downgrades in Europe.
Today’s third-quarter current account data will likely show the deficit widened to 3.4% of gross domestic product, while GDP tomorrow is expected to show the economy maintained a soft 0.2% expansion. Last month, Standard & Poor's lowered its outlook for New Zealand's credit rating to negative from stable. Just five days after Moody’s Investors Service slashed Ireland’s credit rating five notches, the rating agency put Portugal on notice of potential downgrade over its access to affordable debt, while Fitch Ratings flagged Greece’s rating as being on the verge of junk.
“There’s an air of caution ahead of GDP tomorrow – it’s within the margin of error and could be negative, while hanging over it is the S&P warning,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. “The kiwi’s looking quite heavy, its highs keep getting lower and it’s grinding down through the bids.”
The kiwi dropped to 74.16 U.S. cents from 74.73 cents yesterday, and declined to 67.26 on the trade-weighted index of major trading partners’ currencies from 67.56. It fell to 62.20 yen from 62.53 yen yesterday, and decreased to 74.46 Australian cents from 74.95 cents. It was slipped to 56.67 euro cents from 56.73 cents yesterday, and was little changed at 48.03 pence from 48.04 pence.
Kelleher said the currency may trade between 74 U.S. cents and 74.50 cents today with the current account data unlikely to move the currency much unless there’s a number out of leftfield. Still, with Statistics New Zealand front-loading the inflow of reinsurance money for the September Canterbury earthquake, there’s potential for volatility, he said.
Investors’ fears were allayed slightly by Chinese Vice Premier Wang Qishan, who said the world’s second biggest economy “has taken steps to help some EU member counter the sovereign debt crisis” and that he hoped a turning point was near. China has invested an undisclosed portion of its US$2.65 trillion reserves in the euro.
The pound was the weakest performing currency in the London and New York sessions after the U.K.’s public debt hit a record high in November, raising fears Britain may not be able to eliminate fiscal deficits by 2015. The November deficit was 6.3 billion pounds more than expected at 23.3 billion pounds.