NZ dollar falls as European jitters re-emerge

NZ dollar falls as European jitters re-emerge, sapping appetite for risk-sensitive assets

By Paul McBeth

Sept. 24 (BusinessDesk) - The New Zealand dollar fell in local trading as re-emerging fears about the health of Europe's heavily indebted economies sapped investors' appetite for higher-yielding, or riskier, assets and pushed stocks down across Asia.

The kiwi fell to 82.29 US cents at 5pm in Wellington from 82.88 cents at 8am and 82.78 cents on Friday in New York. The trade-weighted index declined to 73.16 from 73.48 last week.

Stocks across Asia fell amid renewed fears over Europe's sovereign debt crisis, with mounting speculation Spain will formally seek a bail-out this week to recapitalise its ailing banking sector. Japan's Nikkei 225 index fell 0.6 percent in afternoon trading, Australia's S&P/ASX 200 index declined 0.5 percent and Hong Kong's Hang Seng Index was down 0.1 percent. New Zealand's two-year swap rate, a fixed payment made to get floating rates, fell 5.5 basis points to a two-week low 6.67 percent.

"From an economic perspective it just looks like a matter time (before Spain asks for a bail-out), but from a political perspective it's another matter," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. "Over the week we should see a bit more firming up of the US dollar," which will bring kiwi down, he said.

Investors will be look at German business confidence indicators in Northern Hemisphere trading after last week's tepid manufacturing data eroded optimism about the region's economic outlook.

The kiwi dollar will probably fall against the greenback this week according to four of five analysts surveyed by BusinessDesk. It almost unchanged on the week at the close of trading on Friday in New York.

The strength of the New Zealand dollar has sparked local debate over the appropriate monetary policy targets of the Reserve Bank as central banks around the world embark on money printing exercises to increase the money supply and devalue their currencies. That's seen the outgoing Reserve Bank governor Alan Bollard and Treasury Secretary Gabriel Makhlouf come out and defend the current settings.

The new governor Graeme Wheeler's new policy target agreement with Finance Minister Bill English includes a long-run average inflation target of 2 percent, in addition to the medium-term target band of between 1 percent and 3 percent.

The New Zealand dollar fell to 63.54 euro cents from 63.78 cents last week and declined to 50.72 British pence from 50.99 pence. It decreased to 78.92 Australian cents from 79.11 cents and dropped to 64.20 yen from 64.79 yen last week.

(BusinessDesk)

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