BusinessDesk: 'It's hard to escape the reality that Europe is in a poor way'

BusinessDesk: 'It's hard to escape the reality that Europe is in a poor way'

By Jason Krupp

The New Zealand dollar fell against the greenback as investors fled to currency safe havens amid reports Germany was preparing for a Greek default.

The New Zealand dollar recently traded at 82.08 U.S. cents, down from 83.33 cents on Friday in New York, and fell to 71.99 on the trade-weighted index of major trading partners' currencies from 72.30 previously.

Global equities fell sharply on Friday amid reports Europe's biggest economy was shoring up its banks for a Greek default, a move that looks increasingly likely with yields on Greek two-year government bonds hovering around 56%. On Wall Street, the Standard & Poor's 500 Index fell 2.7% to 1,154.23 while Europe's Stoxx 600 closed 2.6% lower at 224.59.

On the currency markets investors sold off holdings in Europe’s single currency in favour of the relative safety of the U.S. dollar, with the euro recently trading at US$1.3587, its lowest level since Feb. 22. That dragged down growth-linked currencies such as the kiwi and Australian dollar. The Dollar Index, a measure of the greenback against a basket of six major currencies, rose to a six month high of 77.20.

"It's hard to escape the reality that Europe is in a poor way," said Alex Sinton, a senior dealer at ANZ New Zealand. "There is the potential that if the U.S. dollar does strengthen, we weaken as a factor around it. I suspect once the buying gets going we might test of 81.30 U.S. cents area."

On the crosses, the kiwi recently traded at 78.73 Australian cents, up from 78.61 cents on Friday, and fell to 63.54 Japanese yen from 64.61 yen previously. It rose to 60.42 euro cents from 60.02 cents last week, and dropped to 51.85 pence from 52.16 pence previously.

Sinton said the kiwi may trade between a range of 81.80 U.S. cents and 82.50 cents with the bias towards the downside.

BusinessDesk

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