NZ dollar weakness on stalled economy brings out buyers
by Paul McBeth
Dec. 24 (BusinessDesk) – The New Zealand dollar held above 74 U.S. cents as buyers looked for bargains going into the New Year after government data showed the country narrowly dodged a double-dip recession through the middle of the year.
The kiwi dropped below 74 U.S. cents after a Statistics New Zealand release showed gross domestic product shrank 0.2% in the three months ended Sept. 30 and the prior quarter was revised down a tenth of a percentage point to 0.1%.
With expectations for the kiwi to gain next year as the Reserve Bank eventually resumes tightening monetary policy, the dips in the currency brought out bargain-hunters.
Stronger commodity prices helped underpin the kiwi, and pushed the Australian dollar back over parity with the greenback.
“There were people looking for a negative (GDP number) and demand (for the kiwi) came in after it dropped - people were fighting over it, and supply ran dry on that side of the equation” helping boost the currency higher, said Alex Sinton, senior dealer at ANZ New Zealand.
“There’s a bit of activity as people try to clear their flows, which are knocking the currency around.”
The kiwi edged up to 74.75 U.S. cents from 74.63 cents yesterday, and was little changed at 67.49 on the trade-weighted index of major trading partners’ currencies from 67.38.
It was little changed at 62.02 yen from 62.01 yen yesterday, and inched up to 74.39 Australian cents from 74.36 cents.
It gained to 56.98 euro cents from 56.79 cents yesterday, and increased to 48.48 pence from 48.36 pence.
Sinton said the currency probably won’t get out of the 74 U.S. cents zone today, with most people away for the Christmas holiday.
The euro came under pressure after Fitch credit rating agency downgraded Portugal’s sovereign credit rating to A+ from AA- after Moody’s Investors Service put the nation on notice earlier this week.
Chinese officials helped allay fears over the euro-zone, saying the world’s second biggest economy would support the International Monetary Fund to provide a bail-out to the region if required.
The U.S. economy got another boost from benign data, with new home sales up 0.4% last month, while consumer spending rose for the fifth straight month and new jobless claims fell in the week ended Dec. 18.