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NZ dollar may tumble on global credit concerns

NZ dollar may be poised to tumble after credit concerns erode risk appetite

By Paul McBeth

Dec. 9 (BusinessWire) – The New Zealand dollar may be heading for a tumble after credit concerns in Europe and the Middle East further eroded investors’ appetite for higher yields and put risk currencies such as the kiwi and Australian dollars under pressure.

Rating agency Fitch Ratings downgraded Greece sovereign credit rating to BBB+ from AAA-, while Standard & Poor’s put the Mediterranean nation on negative credit watch, over concerns about the country’s debt levels. Meanwhile, Moody’s Investor Services cut the ratings of some Dubai-linked issuers as it becomes clear the Dubai government won’t bail out investment company Dubai World, and an analyst reported the Arab nation’s state-owned companies could debt problems to the tune of some US$47 billion.

“Risk was down across the board, driven by credit concerns,” said Imre Speizer, markets strategist at Westpac Banking Corp.

The kiwi sank to 70.66 U.S. cents from 71.39 cents yesterday and declined to 63.73 on the trade-weighted index, or TWI, a measure of the currency against a basket of five partners, from 64.01. It was little changed at 78.26 Australian cents from 78.27 cents yesterday and fell to 62.64 yen from 63.59 yen. It was little changed at 48.17 euro cents from 48.16 cents yesterday, and edged lower to 43.51 pence from 43.59 pence.

The currency has broken below 70.80 U.S. cents, a key support level, and could now have a “large move lower,” Speizer said.

The Dubai concerns seeped into the U.K. with speculation the Royal Bank of Scotland has a reasonably large exposure to the region, and the bank’s share price slumped 8% amid rumours of the board is threatening to resign after the British government refused to okay a bonus package.

December’s Australian Westpac Consumer Confidence survey could give direction to the trans-Tasman currencies when it’s released today, according to Speizer, who said the Reserve Bank of Australia’s tighter monetary policy may begin to squeeze spending on housing and other assets.

“We’ve had a number of interest rate hikes across the Tasman and the big question is at what point it will start to dent consumer confidence,” he said.

Locally, last month’s electronic card transactions data will give economists an indication of how retail sales are tracking going into the Christmas shopping season, and Bank of New Zealand expects to see a small gain in the series.


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