NZ dollar falls below 83 cts, through key support, on Italian fears
Feb. 27 (BusinessDesk) – The New Zealand dollar fell below 83 US cents and breached a key technical support level on fears the inconclusive Italian election could herald a return to populist, anti-EU policy, which could spread to other indebted nations in the region.
The New Zealand dollar fell to 82.58 US cents from 83.39 cents at 5pm in Wellington yesterday. The currency broke through its 100-day moving average of 82.94 cents in New York trading. The trade-weighted index declined to 75.59 from 76.28.
The yield on Italy’s 10-year bonds shot up 40 basis points to a 14 year high and the selloff spread to bonds in Portugal and Spain after Pier Luigi Bersani won control of the lower house Silvio Berlusconi’s party gained a blocking share of the senate. The kiwi didn’t move much after Federal Reserve chairman Ben Bernanke defended the bank’s asset purchases.
The kiwi’s break through a key support level saw the selloff “accelerate very quickly as stops got taken out,” said Stuart Ive, a strategist at HiFX. “It’s risk off on the back of the Italian election. The key to this is whether they’re going to get some sort of stability or are they going to a deeper and darker place.”
In the first of his two-day senate testimony, Bernanke said the benefits of the Fed’s vast asset purchases outweighed the risks, helping lift growth while inflation remained tame. The comments follow minutes of the last Federal Open Market Committee meeting, released last week, that showed members were divided on the size and length of the programme.
“Asset purchases are not going to be taken away any time soon, so the kiwi should find some support,” Ive said. “Exporters might buy the kiwi now at these levels.”
The kiwi fell to 63.21 euro cents from 63.84 cents and sank to 54.54 British pence from 54.78 pence. The local currency dropped to 80.67 Australian cents from 81.16 cents and fell to 75.85 yen from 76.83 yen.