NZ dollar under pressure ahead of German vote

NZ dollar under pressure ahead of German vote, Bollard happy with low rates

By Paul McBeth

Sept. 29 (BusinessDesk) – The New Zealand dollar fell in local trading ahead of the German Bundestag’s vote on whether to extend Europe’s bail-out fund and after Reserve Bank Governor Alan Bollard said he was happy with the official cash rate at a record low 2.5%.

The kiwi was little changed at77.84 U.S. cents at 5pm from 77.83 cents at 8am, and was down from 78.45 cents yesterday.

Investors are waiting for Germany’s parliament to vote on boosting the nation’s guarantees to the European Financial Stability Fund to let it buy the debt of distressed states and provide emergency loans in a bid to resolve the region’s sovereign debt crisis.

On his return from meeting U.S. policy makers, the Reserve Bank’s Bollard told Radio New Zealand the nation “is in a reasonably sweet sort of spot because we can move rates when we need to.” He described the atmosphere in New York as depressing, as Europe’s debt crisis weighs on global sentiment.

If the markets can get past the immediate risks in Europe, “it can get back to sitting and waiting for policy makers to come out with their grand plan,” said Khoon Goh, head of market economics and strategy at ANZ New Zealand. “Both the kiwi and Aussie are really out of favour in the current environment,” he said, referring to the trans-Tasman currencies colloquially.

Goh said Bollard’s interview “suggests 2.5% is no longer an emergency setting” with the global turmoil replacing the Christchurch earthquake emergency that prompted this year’s cut.

The currency fell to 69.03 on the trade-weighted index from 69.52 yesterday, and rose to 79.54 Australian cents from 79.38 cents. It fell to 59.55 Japanese yen from 60.01 yen yesterday, and dropped to 57.20 euro cents from 57.79 cents. It declined to 49.84 pence from 50.16 pence previously.

(BusinessDesk)

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