NZ dollar holds near 81 US cents as fiscal cliff talks loom
Nov. 16 (BusinessDesk) – The New Zealand dollar traded at just above 81 US cents, having weakened this week as global risk aversion evaporated and stock markets weakened, while traders are awaiting any early news on the US fiscal cliff talks.
The kiwi dollar traded at 81.03 US cents at 5pm in Wellington from 80.95 cents at the start of the day and from 81.22 cents the previous day. The trade-weighted index was at 72.87, up from 72.80 at the start of the day.
US President Barack Obama and Republican lawmakers are due to meet this weekend to find a way to avoid the so-called fiscal cliff, a mix of tax increases and spending cuts that will kick in automatically on Jan. 1 and risk hampering the already-fragile economy. Global markets have become more risk averse this week with a run of weak global data and increased hostility in the Gaza Strip.
“The general pattern seems to be a reasonable amount of risk aversion on the market that has weighed on the Australian dollar and the kiwi,” said Chris Tennent-Brown, FX economist at Commonwealth bank of Australia.
The kiwi dollar is still broadly within its recent range of 81 cents to 83 cents, he said. In the near term, negotiations in the US over the fiscal cliff are likely to dominate. If agreement can’t be reached, there’s a risk the US economy falls back into recession and weighs on global growth, he said.
The kiwi dollar traded at 65.59 yen from 65.68 yen amid talk elections next month could install the main opposition party and lead to more concerted efforts to weaken Japan’s currency.
The New Zealand dollar traded at 78.40 Australian cents from 78.36 cents. It rose to63.45 euro cents from 63.35 cents and traded little changed at 51.07 British pence.