The New Zealand dollar fell below 79 US cents as investors’ hopes fade for a grand plan to address Europe’s sovereign debt woes will be unveiled this weekend.
The kiwi dollar was little changed at 78.93 US cents at 5pm from 78.99 cents at 8am, but down from 79.61 cents yesterday.
Investors’ appetite for higher-yielding, riskier assets has dimmed in the past couple of days amid declining expectations European leaders will unveil a solid plan to shore up the Euro-zone’s banking system and prevent the spread of sovereign indebtedness at a leaders’ summit this weekend. German policymakers have been trying to damp over-hyped optimism the meeting will deliver a panacea to the region’s woes.
“A whole barrage of headlines is pushing the market around,” said Mike Burrowes, strategist at Bank of New Zealand. The kiwi dollar will “stay around here until it gets to Friday and Monday” when markets have an idea as to how Europe will respond to its problems, he said.
Europe’s woes have been overshadowing upbeat economic data on the other side of the Atlantic, and there’s growing speculation the US economy may avoid another downturn, just after its credit rating was unexpectedly cut by Standard & Poor’s.
New Zealand’s Reserve Bank will review the official cash rate next week, and is expected to keep rates on hold at a record-low 2.5 percent, as Governor Alan Bollard holds the line amid the current global unrest.
Traders are betting Bollard will hike the benchmark interest rate by 33 basis points over the coming 12 months, according to the Overnight Index Swap curve.
The New Zealand dollar was little changed at 77.44 Australian cents from 77.40 cents yesterday, and fell to 60.59 yen from 61.04 yen yesterday. It slipped to 57.52 euro cents from 57.67 cents, and declined to 50.17 British pence from 50.63 pence.
The trade-weighted index was at 69.32 from 69.63 yesterday.