NZ dollar falls to month-low amid Greek default fears

NZ dollar falls to month-low as Greek default fears erode risk appetite

By Paul McBeth

Sept. 12 (BusinessDesk) – The New Zealand dollar fell to a month-low as fears over a possible Greek default lingered into the local trading sessions, leaving investors looking to park their funds in so-called safe haven assets such as gold and the greenback.

The kiwi fell to 81.55 U.S. cents at 5pm from 82.08 cents at 8am and was down from 83.33 cents on Friday in New York.

The Dollar Index, a measure of the greenback against a basket of currencies, climbed 2% to 77.71 after reports Germany was preparing its banking system for a Greek default sapped investors’ appetite for higher-yielding, or riskier, assets. That downbeat sentiment will probably continued into the Northern Hemisphere trading sessions and through the week, with a BusinessDesk survey of seven economists and strategist unanimous in calling a lower kiwi dollar over the week.

“The U.S. dollar has broken up through some large levels, and should be going higher,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. The kiwi is “looking very heavy going into London (trading), and there was some real money selling out of Asia” as fund managers exited their holdings, he said.

That comes ahead of Thursday’s monetary policy statement by the Reserve Bank of New Zealand, where Governor Alan Bollard is expected to keep the official cash rate at a record low 2.5 percent.

Europe’s ongoing debt crisis and the prospect of the U.S. economy falling into another recession has investors looking to protect their funds, eroding Bollard’s ability to remove the emergency stimulus he put in place after the Christchurch earthquake in February.

Traders are betting Bollard will hike rates 42 basis points over the coming 12 months, according to the Overnight Index Swap curve, and will be looking at the central bank’s updated forecasts when the MPS is released.

The kiwi dollar fell to 71.61 on the trade-weighted index from 72.30 on Friday, and was little changed at 78.67 Australian cents from 78.61 cents. It fell to 62.96 Japanese yen from 64.61 yen on Friday and rose to 60.20 euro cents from 60.02 cents. The kiwi declined to 51.45 pence from 52.16 pence last week.

(BusinessDesk)

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