NZ dollar falls as U.S. rescue package disappoints
NZ dollar falls as U.S. rescue package disappoints markets
By Paul McBeth
Feb.11 – The New Zealand dollar fell almost 2 U.S. cents amid disappointment at the lack of detail in the U.S. Treasury’s revamped rescue package to buy toxic bank assets and revive lending to consumers and businesses.
Stocks on Wall Street tumbled after U.S. Treasury Secretary Timothy Geithner announced the plan, of which the main components are a joint public and private sector fund to buy as much as US$1 trillion of toxic debt, and a US$1 trillion programme supplying credit to consumers and businesses. The Dow Jones Industrial index fell 4.7% reflecting markets’ disappointment with the lack of detail on how the plan will work. Support for higher-yielding currencies like the kiwi dwindled as investors returned to relative haven of the U.S. dollar and the yen.
“Currency markets were getting ahead of themselves,” said Khoon Goh, senior markets economist at ANZ National Bank. “They are still taking their lead from equity movements” and the increasing uncertainty among investors will encourage risk averse behavior, he said.
The kiwi tumbled to 51.87 U.S. cents from 53.63 cents yesterday, and was down to 47.20 yen from 48.99 yen. It declined to 40.54 euro cents from 41.56 cents yesterday, and dropped to 79.88 Australian cents from 80.12 cents.
Goh said the New Zealand dollar may go as low as 51.50 U.S. cents today as it continues to face downward pressure: “Don’t worry about the topside.”
Further signs of a deteriorating domestic economy may come with corporate earnings this week from Fletcher Building Ltd. and Telecom Corp. Both companies are expected to report weaker profits.
December’s retail figures will be released on Friday, and are expected to show a month on month fall of 1.1%, according to a survey of Reuters economists.