NZ dollar falls below 83 US cts as global optimism fades with Moody’s downgrades

By Paul McBeth

Feb. 14 (BusinessDesk) – The New Zealand dollar fell below 83 US cents in local trading as optimism about the global economy faded after Moody’s Investors Service downgraded six European nations.

The kiwi fell to 82.92 US cents from 83.53 cents at 8.30am and 83.27 cents yesterday. It declined to 73.03 on the trade-weighted index from 73.34.

Investor flocked to so-called safe haven assets such as the greenback and yen after rating agency Moody’s cut the sovereign credit ratings on Italy, Malta, Portugal, Slovakia, Slovenia and Spain, and put Austria, France and the UK on notice. The move brings Moody’s in line with rival agencies Standard & Poor’s and Fitch Ratings. The announcement burst the euphoric bubble in the wake of Greece’s parliamentary approval to slash government spending in a bid to tap a regional bail-out fund.

“Things are going to continue to worsen in Europe and the countries that are going to be cutting spending will suffer pain and social unrest ahead of elections, which would see a political backlash,” said Imre Speizer, market strategist at Westpac Banking. “The kiwi is at the brink of testing the downside again.”

Traders will be watching figures for US consumer spending when they are released on Tuesday, which will likely show upbeat spending. The world’s biggest economy has been showing an improvement in recent months, and more upbeat data should underpin investor support for equity markets.

That comes ahead of the minutes from the Federal Open Market Committee on Wednesday, which will give markets an idea of how the Federal Reserve is viewing the American economy.

Germany’s Zew survey of economic confidence will also be watched as analysts weigh up the prospects for the heavily-indebted Euro-zone.

New Zealand’s Local Government Funding Agency, a new central debt agency for local authorities to raise money, will hold its first auction tomorrow, though Speizer said it’s unlikely to attract foreign buyers and domestic investors will probably make up the bulk of the purchasers.

The rose to 63.06 euro cents from 62.87 cents yesterday, and was little changed at 52.82 pence from 52.74 pence. It traded at 77.62 Australian cents at 5pm from 77.55 cents yesterday, and was little changed at 64.61 yen from 64.64 yen.

(BusinessDesk)

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