By Paul McBeth
The New Zealand dollar held below 80 US cents after investors lost their appetite for higher-yielding, riskier assets as the prospect grows Europe’s sovereign debt and banking system crises won’t be easy fixes.
The kiwi dollar was little changed at 79.36 US cents at 5pm from 79.35 cents at 8am from 80.07 cents yesterday.
Optimism this weekend’s summit of European leaders would lead to stability in the region was burst by the German Foreign Minister Wolfgang Schaeuble, who told media the meeting wouldn’t produce a “miracle cure.” That sapped appetites for so-called risk sensitive assets, and pushed equity and commodity markets lower.
“Last night was the first obvious disappointment since we had the promise of a grand plan,” said Imre Speizer, market strategist at Westpac Banking. “That should linger for a day or three, pushing the kiwi down.”
Until the Euro-zone is able to show a plan to prevent the high level of public debt among some of its countries from spreading, and shores up its banking system, markets will continue to wax and wane on the region’s progress.
Speizer foresees a near-term fall for the kiwi over the next couple of days, then a short rise to about 81.50 US cents before falling towards 71 cents in the coming months.
Schauble’s comments come after finance chiefs of the Group of 20 nations met last weekend and said they were willing to work towards helping Europe avoid any repayment defaults.
A speech by Reserve Bank Governor Alan Bollard didn’t have much impact on markets, with his comments on monetary policy a “reminder there’s a rebuild coming and has monetary policy effects,” Speizer said. See more here in Gareth Vaughan's article.
Bollard will review the official cash rate next week, and is expected to keep the rate at a record low 2.5 percent, according to a Bloomberg survey of economists.
The New Zealand dollar fell to 77.65 Australian cents from 77.82 cents yesterday, and fell to 60.96 yen from 61.86. It declined to 57.57 euro cents from 57.88, and fell to 50.16 pence from 50.73 pence yesterday.
The trade-weighted index was at 69.52 at 5pm from 70.09 yesterday.