NZ dollar may test 77 US cts as Asian stocks sink amid Chinese liquidity concerns
By Paul McBeth
June 25 (BusinessDesk) - The New Zealand dollar may fall below 77 US cents in European and US trading after fears over
China’s banking sector sparked a sell-off in Asian stock markets, and prompted investors to ditch risk-sensitive
currencies.
The kiwi declined to 77.16 US cents at 5pm in Wellington from 77.55 cents at 8am and 77.47 cents yesterday. The
trade-weighted index fell to 72.79 from 73.21 yesterday.
Stocks across Asia fell as investors digest the impact of the People’s Bank of China tightening of banking liquidity
fuelled concerns a cash crunch will sap growth in the world’s second biggest economy. China’s Shanghai Composite Index
fell 3.8 percent in afternoon trading, while Japan’s Nikkei 225 index was down 1.8 percent, and Hong Kong’s Hang Seng
Index dropped 1.4 percent.
The New Zealand and Australian economies are closely linked with China’s fortunes, with both countries exporting large
quantities into the world’s most populous nation.
“As long as the China jitters linger, the kiwi’s going to suffer more than most,” said Mike Jones, currency strategist
at Bank of New Zealand in Wellington. “The kiwi’s still consolidating in the 77 to 78 US cents range, but looks likely
to test the bottom of that tonight.”
The local currency has shed about 4.1 percent against the greenback since Federal Reserve chairman Ben Bernanke said
last week the central bank may start tapering its $85 billion a month asset purchase programme this year if the economic
data continues to improve.
Jones said the downtrend in the local currency probably isn’t enough to push it below 75 US cents, and any turnaround in
US data may spark a rally towards 80 cents.
The kiwi slipped to 83.47 Australian cents from 84.08 cents yesterday and dropped to 75.23 yen from 76.21 yen. The local
currency weakened to 58.83 euro cents from 59.11 cents and declined to 49.98 British pence from 50.39 pence.
(BusinessDesk)