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NZ dollar makes big gains as US federal shutdown begins

NZ dollar gains as US federal shutdown begins, NZ economy stands out

Oct. 1 (BusinessDesk) – The New Zealand dollar held its gains against the greenback on speculation a prolonged US government shutdown and an more weighty debate about the debt ceiling this month will sap demand for US dollars.

The kiwi traded at 83.04 US cents at 5pm in Wellington, holding its gains through the day from 82.84 cents late yesterday. The trade-weighted index was at 77.32, up from 77.19 the previous day.

It went past midnight in Washington, with no apparent agreement between the White House and Republicans, meaning the White House Office of Management and Budget would have ordered state agencies to begin shutting down services the government can’t pay for. A bigger threat is this month’s
deadline to lift the US$16.7 trillion debt ceiling or face possible default on debt payments.

“There are a lot of unknowns,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. “It is not particularly supportive of the US dollar.”

While a shutdown means “going through the unknown” for the first time since 1996, the US debt ceiling “is the more potent potential negative,” he said.

The greenback fell against the British pound as uncertainty over Germany’s government and the region’s economic fortunes dampened enthusiasm for the euro.

The New Zealand dollar dropped to 88.64 Australian cents after the Reserve Bank of Australia kept its benchmark rate unchanged as expected and said current settings were appropriate.

Rennie said the Reserve Bank of New Zealand is heading for a tightening cycle with more signs of strength in the domestic economy, making it a stand out compared to Europe, for example. America’s fiscal woes may yet be a negative for the kiwi if the impasse looks prolonged enough to threaten growth, he said.

The kiwi was little changed at 61.35 euro cents and weakened slightly against the pound to 51.14 pence from 51.28 British pence at the start of the day and 51.23 pence yesterday.

The local currency traded little changed at 81.59 yen.

(BusinessDesk)

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