Bernard Hickey talks with HiFX Senior Dealer Dan Bell about the week's currencies and markets action, including Friday's surprise news of a 'Double-Downgrade' of New Zealand's sovereign credit rating by Fitch and Standard and Poor's. See all our coverage of the Double-Downgrade here.
"There's a potentially an impact on the cost of funds and an impact on the currency over the next 24 hours," Bell said in the mid-afternoon interview.
The New Zealand dollar dropped to the low 76 USc range from 78 USc overnight after Fitch first downgraded New Zealand to AA from AA+ around 5.30 am and Standard and Poor's cut the rating at 1.30 pm.
Bell saw the potential for further falls in London and New York trading overnight.
Currency markets globally, however, remain focused on the European Sovereign Debt crisis, where there were a multitude of players at odds with each other as Europe scrambled to find a solution.
"You've got 17 voting members in the EU and a region with 27 countries and various levels of indebtedness and economic performance across the region that is going to make getting the bailout together very, very difficult, and all this while Greece is still having major issues," Bell said.
A decision next week from the 'Troika' of the IMF, EU and ECB on whether to deliver the next tranche of Greece's bailout plan would be closely watched.
Markets would also be watching the Bank of England meeting on Thursday closely, where the potential for a new round of money printing was being discussed, even though inflation was now running over 3%.
The European Central Bank is also expected to cut its interest rate next Thursday, possibly by as much as 50 basis points.
The Reserve Bank of Australia would also announce on interest rates on Tuesday, although it is expected to stay on hold.
The New Zealand dollar has traded in a 76.3 USc to 79.5 USc range this week, with the pressure on the lower end of that range on Friday after the credit rating downgrades.
"It looks like the way things are going that the bias is to the downside, particularly with these downgrades."
The New Zealand dollar was around support of 78.5 Australian cents with resistance around 79.5 Australian cents.
"The Kiwi dollar is breaking some pretty key levels against the major currencies and the action over the next 24 hours will be pretty interesting."
Dan Bell is the Senior Dealer at HiFX, a UK-headquartered foreign exchange dealer with significant operations in Australia and New Zealand. It has a dealing room in Auckland. See more detail here.