NZ dollar may fall as US markets pause for Thanksgiving

NZ dollar still vulnerable as US markets pause for Thanksgiving

By Paul McBeth

Nov. 26 (BusinessDesk) – The New Zealand dollar may fall in light trading reflecting the U.S. Thanksgiving holiday and as Europe’s debt woes continue to erode risk appetite.

The kiwi has shed 4.5% in the past three weeks as European debt woes and Standard & Poor’s’ warning on New Zealand’s foreign indebtedness took the sheen from the currency’s lustre, which was testing the 80 U.S. cents level. Ireland’s bail-out and improving data in the U.S. has seen investors return to so-called safe havens such as the greenback and yen, and the kiwi’s weakness will likely last out the rest of the year. That sentiment held in the London and New York sessions, where trading was thin due to the U.S. holiday.

“It was pretty dead with not a lot of volume going through, but there’s still a pall hanging over sentiment,” said Alex Sinton, senior dealer at ANZ New Zealand. In the short-term, “the kiwi is still vulnerable to a technical pull-back” with 74.41 U.S. cents the next major support level, he said.

The kiwi recovered from a month-low, gaining to 76.07 U.S. cents from 75.87 U.S. cents yesterday, and edged up to 68.68 on the trade-weighted index of major trading partners’ currencies from 68.58. It rose to 63.58 yen from 63.32 yen yesterday, and was little changed at 77.53 Australian cents from 77.51 cents. It slipped to 56.91 euro cents from 56.96 cents yesterday, and increased to 48.26 pence from 48.14 pence.

Sinton said the currency may trade between 75.70 U.S. cents and 76.40 cents today with little happening on the local front to dictate direction.

Reserve Bank of Australia Governor Glenn Stevens appears before Parliamentary committee today, and may give some hints about the bank’s thinking for the Dec. 7 review. The RBA hiked the target cash rate a quarter-point to 4.75%, and the market is picking a further 37 basis points being added over the coming 12 months, according to the Overnight Index Swap curve.

Sinton said next week’s Australian gross domestic product figures will be closely watched, with “some rumblings that it’s not as attractive as we would hope.” Australia dodged recession during the global financial crisis and was the first G-20 nation to tighten monetary policy as Chinese demand for its raw materials kept the economy humming along.

“It can’t be the lucky country all the time,” Sinton said.

(BusinessDesk)

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