NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
Dec. 24 (BusinessDesk) – The New Zealand dollar fell to a three-week low against the greenback after equities weakened and doubts grew on the ability of US Republicans and Democrats to reach agreement on averting the fiscal cliff.
The kiwi dollar slipped to 82.32 US cents from 82.37 cents in New York on Friday and from 83.02 cents in Wellington at 5pm on Friday. The trade-weighted index was at 73.69.
On Wall Street, the Dow Jones Industrial Average and the Standard & Poor’s 500 Index both fell about 0.9 percent on Friday and traders were driven to the US dollar and the yen following Republican House Speaker John Boehner’s failure to win support from his party for a compromise deal. Senator Joe Lieberman told CNN Boehner’s stumble was “the first time I feel it's more likely that we'll go over the cliff than not.”
The fiscal cliff talks “seem to be lurching along to a poor ending,” said Tim Kelleher, head of institutional FX sales at ASB Institutional.
The decline in the Australian and New Zealand dollars was exacerbated by the biggest speculative long positions since 2003 in the currencies, making them more vulnerable when equities sold off on the back of the fiscal talks, he said. The kiwi dollar may trade in a range of 82 US cents to 82.75 cents today.
Failure to avert the fiscal cliff would mean some US$600 billion of tax increases and spending cuts kick in on Jan. 1, which risks sending the world’s biggest economy into recession in 2013.
The New Zealand dollar traded at 69.42 yen from 69.36 yen on Friday in New York, near a two-week low. The local dollar traded at 62.45 euro cents from 62.49 cents and slipped to 50.89 British pence from 50.96 pence. The kiwi traded at 79.15 Australian cents from 79.12 cents.