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NZ dollar may fall on ECB moves

NZ dollar may extend decline as prospect of ECB stimulus fuels greenback

By Paul McBeth

May 29 (BusinessDesk) - The New Zealand dollar may extend its decline as the prospect of European Central Bank stimulus next week stokes demand for the greenback, while sliding business confidence locally saps demand for the kiwi.

The local currency fell to,84.80 US cents at 5pm in Wellington from 84.95 cents at 8am and 85.36 cents yesterday. The trade-weighted index dropped to 79.17 from 79.71 yesterday.

The kiwi fell to a two-month low 84.68 US cents yesterday after the greenback rallied on weak German employment data, which heightened speculation the ECB will stimulate the regional economy when it reviews monetary policy next week. The local currency came under pressure after a survey showed New Zealand business confidence fell for a third month, the same day Fonterra Cooperative Group cut its forecast payout to farmers on declining dairy prices.

"The market is looking to sell the kiwi and is looking for excuses," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "I don't think that's going to change until the 12th of June when the Reserve Bank meeting, which I think will turn it around."

Traders are expecting central bank governor Graeme Wheeler to revise down the forecast track of interest rate increases, though a weaker kiwi, strong migration flows and fiscal stimulus are being ignored, Speizer said.

The kiwi fell to 91.37 Australian cents at 5pm in Wellington from 92.18 cents yesterday after Australian government figures showed future capital expenditure intentions were ahead of expectations.

Traders will be watching for the second estimate of US gross domestic product in the first three months of the year to gauge the strength of the world's biggest economy.

The local currency dropped to 86.23 yen at 5pm in Wellington from 87.03 yen yesterday, and fell to 62.30 euro cents from 62.64 cents. It declined to 50.68 British pence from 50.78 pence yesterday.

(BusinessDesk)

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